London-based investment firm Hartmann Capital has applied for a winding-up order after identifying a £1.5m client money shortfall and being censured by the Financial Conduct Authority.
The FCA has served the firm with a regulatory notice that bans it from dealing with or releasing client money. The notice also requires it to cease carrying out any regulated business except for settling certain transactions in non-derivative financial instruments and closing derivative contracts to which it is a party.
The action comes after Hartmann informed the regulator that it had a £1.5m shortfall on £25m of client money as well as a £1.2m capital shortfall.
The firm also proposed using client money to partly fund debt payments if it was otherwise unable to meet them.
The FCA’s regulatory notice says: “In the FCA’s view, there is no reasonable prospect of the firm being able to make good the client money shortfall and there is a real risk that Hartmann may, whether or not in good faith, permit client money to be released from its client bank accounts or client transaction accounts – resulting in a greater client money shortfall.”
Hartmann Capital applied for a petition to wind up on Christmas Eve. A statement on the firm’s website says: “On 24 December the directors applied to the court for a petition for the winding-up of the company. We will continue to keep clients informed of developments.”
Philip J Milton & Company managing director Philip Milton says: “Client money should be kept absolutely separate from other funds.
“There is no way a firm should have a deficit on a client account so one has to question what on earth the directors and auditors were doing.”