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Harlequin investors face legal uncertainty over claims as debts hit £90m

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Investors in collapsed overseas property firm Harlequin Property may not have valid claims against the company as the joint administrator reveals outstanding debts even without investor claims are expected to hit almost £90m.

Harlequin Property, the trading name of Harlequin Management Services (South East), is an unregulated firm that sold investments in luxury resorts in the Caribbean and elsewhere, with some clients investing in Harlequin through their Sipps.

Harlequin filed for administration in April, with Anthony Davidson and Stephen Ryman of Shipleys appointed as joint administrators in May.

In the joint administrators report sent to Harlequin creditors last week, Shipleys says based on information provided by Harlequin directors, unsecured creditor claims are expected to reach £89.1m.

Of the total money owed, £78m is due to related parties connected with Harlequin, including UK trading companies Harlequin Worldwide and Harlequin Travel, Harlequin development companies, and £147,000 in unallocated investor deposits.

Among the unsecured claims is £4.3m owed to trade creditors and an estimated £1m owed to Harlequin sales staff in unpaid commission.

The largest trade creditor is Tailormade Alternative Investments which is owed £484,543. It is part of the same group as Tailormade Independent, a former Harlequin distributor which in March was prevented from carrying out new pensions business by the FSA and was limited in disposing of its assets. Tailormade Independent is still able to carry out pipeline business.

Harlequin directors say the company is owed £86m by other related Harlequin firms, but estimate that only £8,695 in assets is likely to be realised.

In his report, joint administrator Anthony Davidson says he has received “numerous” claims from Harlequin investors, but it appears from the documents he has seen Harlequin “only acted in an intermediary capacity” between investors and the overseas companies.

He says: “For the purposes of this report, the joint administrators have not recognised these potential investor claims as the contractual relationship is between the investor and the overseas companies.

“The joint administrators are currently seeking legal advice in this matter and will update creditors of this opinion in due course.”

Harlequin investors can still submit their claims to Shipleys pending the legal opinion.

Harlequin declined to comment.

The Financial Conduct Authority issued a warning to investors last month considering paying Harlequin and its associated companies more money, telling investors to “proceed with caution.”

The regulator first issued an alert to advisers about Harlequin in January. The Serious Fraud Office began an investigation into Harlequin in March.

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The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. Forecasts and past performance are not a guide to future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you of any change to our views.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. No surprise here then. I just hope the compensation for this does not come out of my firms pocket. We did not recommend this investment. There were obvious flaws and we would have strongly advised against investing. I go so far as to say I would not have accepted instructions to act for anyone wanting to invest therein. So why should I now compensate for greed and incompetence.

  2. Knightly.
    So why do you put up with your other fees to just as corrupt and inefficient organisations?
    Do I need to list them??

  3. I still don’t think we’re asking the correct questions of this scheme and the involvement of the regulator.

    Why wasn’t the regulator issuing warnings as far back as 2010 when people started reporting their concerns to the regulator.

    If individuals did invest money through this company did they think they were dealing with a UK registered company? and if so does this effectively consitute fraud?

    To me, the Harlequin structure is deliberately complicated to hide the final destination for clients money. We’re now told that the funds are not in a UK registered company and that UK regulation does not apply so why was Harlequin giving the impression that FSCS could apply if the scheme went bankrupt.

    I hope that the regulator and serious fraud squad are asking some awkward questions to the director of these companies and connected partners as this should have never been allowed to happen in the pension arena.

  4. Fair question “anonymous”. Because I have to! As long as I care to put up with it and as long as I want to continue to provide a service to clients who over the years have become friends. Of course as long as it’s financially viable to do so! This doesn’t mean that I can’t complain to the organisations concerned. Not that it will do any good!

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