Financial Services Compensation Scheme  

FSCS pays out £14m over failed property scheme advice

FSCS pays out £14m over failed property scheme advice

Advice on a now failed property scheme has led to millions of pounds in compensation payouts after hundreds of clients brought successful claims.

The Financial Services Compensation Scheme, which compensates clients on behalf of failed regulated firms, told FTAdviser in February it has paid out £14m to 633 clients who invested in London Property Holdings.

London Property Holdings was an unregulated real estate scheme which got in financial trouble following the financial crash of 2007 as banks increasingly withdrew their financial support.

The FSCS received claims against five advice firms in relation to advice on the investment. According to the scheme the bulk of the investments were made between 2009 and 2012, and some also before 2006.

The claims led to payouts of £875,000 on behalf of Enys Road, £4.35m for Hyde Gardens (dissolved), £4.5m for Lower Church Street (dissolved), £30,000 for Platinum Wealth Group Ltd (dissolved), and £4.2m for Portland Financial Management UK Limited (PFM UK), the FSCS has confirmed.

Enys Road is still trading but seems, from Companies House, to have changed its business activity to leased real estate, rather than financial services work authorised by the FCA. The firm did not respond to a request for comment. 

PFM UK (dissolved) is a separate company from active firm Portland Financial Management, which was not involved in these matters.

All firms have been declared in default by the FSCS, meaning the scheme has received at least one valid claim against them and is satisfied the firms are not able to meet the claims.

FCA records also show Hyde Gardens was struck off the FCA's register of regulated firms in June 2013 after it failed to pay regulatory fees and levies totalling £18,660.52.

One investor, who received £50,000 in compensation from the FSCS last year, said his investment had dropped from £68,036 to nil in 2017.

He had been advised by David Charles Bolton, a director at Lower Church Street between 2008 and 2011, who now works elsewhere.

Mr Bolton told FTAdviser Lower Church Street had been acquired by PFM UK in 2009 after which he ceased to have meaningful influence over the firm, which dissolved in 2016. 

He was no longer a director after 2010 and said he "advised clients on their financial planning and the portfolios were run by PFM [UK]." 

He added: "I left the group as the exposure to the Hintville Alpha Fund fund in the discretionary portfolios was increased markedly and I was uncomfortable with this." 

The Hintville Alpha Fund was one of three funds which were part of the London Property Holdings investment scheme.

According to Companies House PFM UK held the position of company secretary at Enys Road between 2009 and 2012 and at Hyde Gardens Limited between 2010 and 2012. 

Entries on the FCA's register of regulated firms and individuals show three directors, who are no longer authorised by the FCA, worked across four of the five advice firms at the time the bulk of the investments were made.