The Financial Services Compensation Scheme (FSCS) has made its first compensation payments to customers of failed discretionary fund manager (DFM) Strand Capital.
In the past two weeks the lifeboat fund said it has paid out £5.7m to 796 customers who had invested through their self-invested personal pension (Sipp).
According to the FCA Register, Strand Capital held permissions to advise on investments, which means FSCS payouts could send advisers' levy for the scheme higher, if claims made are related to advice.
Strand Capital went into insolvency in May last year and is estimated to have had about 3,000 customers on its books.
According to the company's website, the DFM managed five model portfolios, all with a minimum investment of £10,000.
Smith & Williamson and LA Business Recovery were appointed as joint administrators to carry out an assessment of the client money and assets held by the firm with a view to returning as much client money to customers as possible.
But the reconciliation of client cash has not yet been completed, and shortfalls have yet to be finalised, therefore the FSCS has decided to step in and compensate in relation to the whole cash balance held by clients, up to the £50,000 limit.
Some customers will have had cash in excess of £50,000, the scheme said.
Other eligible customers who held cash through other Sipp providers, or directly with Strand, will receive compensation payments over the next few weeks.
The FSCS said it will continue to work with the joint special administrators (JSA) of Strand to ensure customers get back their assets as soon as possible.
It said: “We anticipate that a conclusion to this part of the process will require the JSAs to seek court approval of a distribution plan, which is likely to be a number of months away.
“Because FSCS compensated customers, any distribution of client money by the JSAs will come to FSCS in the first instance, but FSCS will pass on recoveries we receive in accordance with our rules, which, for example, allow us to pass on recoveries that are in excess of the amount of compensation that we have paid to a customer.”