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Transact criticised for blocking EEA fund sale

Transact criticised for blocking EEA fund sale

An investor who is trying to sell-off his holdings in the troubled EEA Life Settlement fund has claimed Transact is blocking a broker firm from buying his shares.

The Guernsey-based fund invested in second-hand insurance policies from elderly Americans, but was suspended in 2011 after the Financial Services Authority said this type of policy was “toxic” and possibly unsuitable for retail investors.

Investors ended up with cash locked in the fund after it lost $200m (£129m), which EEA blamed on the regulator.

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In May, two broker firms, Southey Capital and Tullett Prebon Alternative Investments, lined up to rescue EEA investors by offering to buy the run-off shares below their net asset value.

Yet Southey, which offered to buy between 32.4 per cent and 49.2 per cent of the share’s NAV, said it had hit a wall when Transact refused to accept money directly from the broker firm to buy EEA shares, as it would be classed as a third party deposit.

Southey Capital’s managing director Robert Southey said he had not yet encountered any problems with other self-invested personal pension providers in terms of buying the shares.

“We have bought shares from Sipps before; the client instructs the Sipp provider to sell, and we work with the Sipp provider to complete the trade.”

But Transact firmly denied it was blocking the broker firm from buying the shares below the NAV. 

A spokeswoman for Transact said: “If an investor is having issues then they should contact Transact, either themselves or via their adviser, and we'll be happy to help.”

But according to Mr Southey, Transact had stated that the money would have to come from the Sipp holder, meaning the client would need to buy the shares at the price stated in their last valuation, for the broker to then buy them directly from him.

The Transact client, who did not want to be named, said he could not close his Sipp because he was struggling to sell the EEA shares, which is the only investment left in the pension wrapper.

He said he was unhappy that Transact was preventing him from selling or transferring shares, which he owns, and questioned why he should buy the shares at their current price to sell them again at a loss.

Mr Southey suggested the issue might revolve around withdrawing from a pension too early, or the provider wanting the full market price to be paid. 

“Clearly there isn’t a published price, like a publicly traded stock or fund, but with a impartial intermediary such as Southey Capital offering quotes, that should provide enough arms length to justify that this is a normal transaction. 

He added: “We have so far only come across this with a Transact holder, so it does appear to be quite isolated.

“But as most investors hold their shares offshore, so I wouldn’t be surprised if other onshore platform providers are similarly worried about breaking rules unintentionally.”