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FSA swoops on Castlestone offices

Castlestone Investment Management claims the FSA’s investigation into the firm is not related to criminal offences following last week’s raid by the regulator.

Last week, the FSA executed search warrants on Castlestone premises in London and Chichester. The City of London police confirmed they were involved in the execution of the regulator’s London searches.

In a statement released on Friday, Castlestone said it is unable to disclose the exact nature of the investigation as it is bound by the FSA’s confidentiality rules but insisted it is a regulatory, rather than criminal, issue.

In June, three Castlestone funds were temporarily closed to new subscriptions following a review by the Irish Central Bank. Both Castlestone and the Irish Central Bank have refused to reveal the reasons behind the suspension but have confirmed that it related to Ucits IV paperwork.

As recently disclosed by Money Marketing’s sister website Fund Web, Castlestone’s Intelligent Portfolio displays high levels of externally sourced gearing. The portfolio acts as a fund of funds across a series of its in-house funds. The 191.7 per cent gross exposure the fund demonstrates can be typical for institutional funds but it is uncommon practice for retails funds.

Hargreaves Lansdown, Cofunds, Skandia and Novia have all suspended sales of the funds.

Hargreaves Lansdown group compliance manager Humphrey Turner says: “The move is purely precautionary and there was not much money going into these funds. We were first alerted by the news coming from the Irish Central Bank which saw the total expense ratios on the funds jump to 5 per cent.”

Skerritt Consultants head of investments Andy Merricks says: “We would not go near the firm at the moment. There are enough problems with investing. There may be nothing wrong but you do not need the additional, and importantly, unknown risk.”

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  1. If there’s no suspicion of criminal activity, then why was it deemed necessary to involve the police in executing the FSA’s warrant to search the premises? If the investigation is purely regulatory, then surely only the regulator needs to be involved? Or is this all part of the FSA’s ‘new’ policy of aggressively intrusive and interventionist regulation?

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