The FCA has refused an authorisation application from the directors behind a firm facing over £1m in claims over advice to invest in the collapsed Connaught Income funds.
The regulator says Strabens Hall is facing “inevitable insolvency” due to anticipated liabilities of £1.05m to eight of its customers who complained to the Financial Ombudsman Service about advice to invest the Connaught Income fund 1.
Strabens Hall directors Adam Benskin and John Halley applied for FCA authorisation for a company called Independent Family Advisers Ltd, which was incorporated in December 2013.
IFAL wanted FCA permission to acquire the Strabens Hall business – including its assets, staff and clients – but without the anticipated liabilities if the business becomes insolvent.
IFAL was to fund Strabens Hall after it entered insolvency so it could pursue a legal dispute with its professional indemnity insurer. The company believes this would lead to a settlement that would benefit the FOS complainants.
In its final notice, the FCA says it does not consider IFAL “fit and proper”.
It says: “The application, as submitted and as developed in representations following the warning notice, lacked detailed and clear proposals on issues of importance to consumers.
“It also lacked an appropriate recognition of the gravity of the anticipated circumstances of Strabens Hall’s failure and the consequences it could have for consumer creditors, public confidence in the system for redress provided by the FOS and for those funding the FSCS.
“In this case, the FCA notes the inadequacies in the original application and that IFAL has been slow to make changes to its application, that clarification has been provided in a piecemeal and incremental fashion and that IFAL has required considerable input from the FCA in developing its application.”
In response to the FCA notice, Strabens Hall says: “The notice, while only published in June 2016, covers a phase of interaction with the FCA between September 2013 and the end of February 2015. There have been significant developments in the period since then and Strabens Hall is able to confirm that these include the successful conclusion of the dispute with its professional indemnity insurer on a satisfactory basis for all parties concerned.”
It adds: “Strabens Hall continues to more than meet its full legal and financial obligations, and is trading normally. Now that these matters have been concluded we look forward to continuing to focus on assisting clients meet their financial planning and investment objectives, whether directly or working in tandem with their other advisers.”
The Connaught Series 1 fund was suspended in March 2012 and Money Marketing revealed investors faced losses of up to 50 per cent.
In March 2015, the FCA announced plans to investigate Capita Financial Managers and Blue Gate Capital, the operators of the failed Connaught Income Series 1 Fund, after it withdrew from talks with the firms.