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Ethical IFA firm goes bust owing investors 900,000

A Cardiff IFA claiming to specialise in socially responsible investment has gone bust, leaving investors facing losses totalling over 900,000.

One elderly investor was persuaded to invest 200,000 into Ethical Financial Limited by her financial adviser Brian Harrison Spence, who is one of the firm’s two directors.
Spence claims that clients invested in the company out of philanthropic motives. He says the firm became insolvent because of a big claim against it which was not covered by professional indemnity insurance. Spence says the firm had a string of visits from the regulator from the date of its creation in 1989. He says the regulator did not object to the firm issuing preference shares to its clients.
He says that clients were warned of the potential conflict of interest of an adviser recommending investing in his own firm. Spence adds that he does not expect to work in an advisory capacity in the future.
Managing director Chris Powell-Thomas says that a creditors’ meeting, to be held by insolvency practitioner Stones & Co of Swansea, will take place on January 19 when creditors will vote on the appointment of a liquidator.
Seventy investors – many of them clients of the company – were sold preference shareholdings for between 200,000 and 3,000. There were two classes of shares which were predicted to pay annual income of 7 or 10 per cent. Clients are unlik-ely to be compensated as the loss relates to a direct investment.
Spence says: “Investing in the firm was a philanthropic thing. Fifty per cent of the investors have given me their support.”
Investor Eric Coleman is a client of the firm and, with his wife, invested 7,000 in Ethical Finan-cial. He says: “I put in my money in 1999 and never received a penny of income from the preference shares. I feel despondent about the whole thing.
“It is ridiculous to say this was a philanthropic thing. That money was part of my retirement plans and I have seen nothing from it. I might as well have given him a cheque.”


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