Financial Conduct Authority  

FCA warns investors of 'considerable' Avacade shortfall

FCA warns investors of 'considerable' Avacade shortfall

The City watchdog has written to investors warning of a “considerable shortfall” in compensation payments after it won its case against unregulated introducer Alexandra Associates UK and its directors.

In the letter, seen by FTAdviser, the Financial Conduct Authority said investors were only likely to receive a small fraction of the £11m in compensation which they were owed.

The FCA states: “On present information about the scale of the losses and the value of the assets of the defendants, it is likely that there will be a considerable shortfall. 

“Any compensation payment is likely to be a very small proportion of the amount invested, but it is not possible at this stage to provide more precise information. 

“A realistic estimate about how long this may take is not possible at this time.”

Last week the FCA won its court case against unregulated introducer Alexandra Associates UK and its directors over the transfer of £92m in pension assets - a decision which paved the way for £11m to be paid out to investors since an earlier restitution order can now be enforced.

The Court of Appeal upheld previous findings that the activities of Avacade Limited, Alexandra Associates and their directors were unlawful as they had advised on investments, made unapproved financial promotions and made false or misleading statements.

The court ruled Avacade, which is in liquidation, Alexandra Associates, and directors Craig Lummis, Lee Lummis and Raymond Fox had made false and misleading statements to investors which led them to transfer their pensions into self-invested personal pensions and then into alternative investments such as HotPods (office space available for rent), tree plantations and Brazilian property developments. 

More than 2,000 consumers transferred about £91.8m from their pensions into the Sipps. 

Approximately £68m of that amount was invested in products promoted by Avacade and Alexandra Associates and from these investments both companies earned commissions in the region of £10.8m but many of the underlying investments have since failed or are in liquidation. 

In its letter the FCA said if Alexandra Associate or Craig Lummis and Lee Lummis did not have sufficient assets to meet the restitution orders then it was likely to lead to the “bankruptcy of the individuals and the liquidation of AA so that any assets can be realised”. 

This money will then be used to pay their creditors, which includes investors.

Fox petitioned for his own bankruptcy and was made bankrupt in August 2020. 

The FCA said it will continue to keep investors updated on any developments.

amy.austin@ft.com

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