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30 IFAs set for mass FOS referral over structured product charges

UK-Money-Currency-Note-Pound-GBP-Crumpled-700x450.jpg is mounting a campaign with the support of 30 adviser firms to refer at least 500 complaints against Reyker Securities to the Financial Ombudsman Service over charges levied on former Merchant Capital investors unless they are lowered.

Reyker took over as custodian of Merchant Capital plans after the collapse of the structured products firm in January and parent Merchant House in April.

Reyker told 12,000 Merchant Capital investors in April it would impose charges to cover custody and administration costs that Merchant House Group agreed to pay the firm before it went into administration. Reyker estimated charges would not exceed £500 over the term for capital plans and £600 for income plans but said this was not guaranteed.

Adviser research website StructuredProductReview, operated by Lowes Financial Management, argues the charges are unfair as they should not be paid by the investors. Founder Ian Lowes says: “The clients invested in a product where all the charges through to maturity were paid at outset. Reyker is also charging more than is commercially acceptable and more than the clients could have anticipated.”

Lowes has written to FOS chief executive Natalie Ceeney to ask her to intervene. He has had one test complaint rejected by Reyker on the basis that the prospect of future charges was adequately disclosed. He says the next step will be to co-ordinate at least 500 complaints as a mass referral to the FOS, backed by around 30 adviser firms that have pledged their support. The complaints would need to be lodged with Reyker individually and rejected before they could be referred in bulk to the FOS.

Lowes is also investigating whether the FSCS could become liable for the charges if Merchant House is declared in default as the charges arose as a result of its collapse.

Kilsby Williams & Gould Chartered Financial Planners director Simon Gould says: “Reyker knew the terms under which it was taking on Merchant Capital business. It is holding clients to ransom.”

Reyker says it cannot comment due to data protection and client confidentiality.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Reyker says it cannot comment due to data protection and client confidentiality.

    What client data is being asked for here that they can’t comment? One word comes to mind here. Bullsh*t.

  2. The first priority should be to make sure Reyker (or another custodian) can deliver all the maturities as they fall due. The FSA should know the terms of the contract before they approved the appointment of Reyker and any extra charges not agreed should be investigated but we cannot afford for Reyker to get into trouble and bring everything down to FSCS.

  3. As an IFA I would not take on a client of an ex IFA and do it for free. Isn’t this what we are asking Reyker to do? If they did it for free how long would they be able to sustain that and would we therefore be looking at another company that exits the market as they didn’t keep their affairs in good financial order. I think we have to ask ourselves what the alternatives were at the time and I suspect they were worse than what has happened!

  4. @Ken: If it was agreed that these costs would be paid by Merchant House before they went into administration, as the article says, then they should join the queue with the other unsecured creditors.

  5. I have no issue with Reyker being paid for the service they provide – at a fair rate – not at the levels they are proposing to dictate to the captive audience which is far in excess of what would be deemed commercially acceptable.

    The fees have arisen because Merchant are unable to meet their obligations to the investors and for this reason I feel that the clients should be able to recover their losses from the FSCS. It would be better for all of us if the bill that the FSCS ultimately have to pick up is a fair and reasonable one rather than one that is inflated because Reyker have chosen to charge significantly more than a fair amount simply because they can.

  6. Missold Investments 14th June 2013 at 10:41 am

    FOS (and FSCS) powers go as far as putting the investor back into the financial position they would have been in had they not invested. Unless these plans have lost money overall, its difficult to see how FOS or FSCS could help in the Reyker case.

    If FSCS were to payout, it would hit the IFAs with an increased levy. Turkey’s voting for Christmas?

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