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Merchant Capital winds down business

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Merchant Capital, the structured products arm of Merchant House Group, is winding down its business and could be forced to appoint a liquidator by the end of this week.

Merchant House Group, and its IFA arm Merchant House Financial Services, continue to trade and are not affected by the developments at Merchant Capital.

In an email sent to staff on 8 January, seen by Money Marketing, the Merchant Capital board says both it and the Merchant House Group board are keen to avoid liquidation if possible.

The email says: “As you will already know, Mcap will be surrendering its FSA licences no later than 1 February next, following which date it will no longer conduct FSA regulated activity for the foreseeable future and is currently winding down its operations in an orderly manner.”

A Merchant Capital spokesman refused to clarify whether it will surrender its FSA licences in February 2013 or 2014.

The email says Merchant Capital will now carry out a short review of the business, including its creditors.

It adds: “If by the end of this week, however, it becomes apparent that acceptable repayment proposals for these debts cannot be agreed, and/or that any goodwill value associated with the book of business is not readily realisable, and/or that the planned business opportunities do not produce a viable business model going forward, MCap will have no alternative but to appoint a liquidator.”

Employees will be treated as preferred creditors in the event Merchant Capital is liquidated. Money Marketing understands a number of staff may not have not been paid since 30 October.

The email goes on to say that Chris Day has resigned as a director of Merchant Capital. Day stepped down from his role as chief executive of parent group Merchant House Group in November.

Merchant Capital declined to comment.

Merchant Capital custodian and administrator Reyker Securities posted an update for advisers and investors on its website, also on 8 January, which says the Merchant Capital telephone line has a recorded answerphone message which refers clients to Reyker.

Reyker says it did not agree or discuss this with Merchant. The company took over as custodian of Merchant Capital assets after Pritchard Stockbrokers was suspended by the FSA from regulated activities in February.

Last week, Money Marketing revealed Reyker had ended its relationship with Merchant Capital and Merchant House Group. Reyker would not comment on the reason behind this decision but said the FSA was aware of the situation.

At the time, Merchant House declined to comment on the suggestion that Merchant Capital was winding down, saying only the business was under review.

Merchant House Group cancelled trading on the Alternative Investment Market in November after the company failed to raise sufficient funding to restore trading.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Money Marketing understands a number of staff may not have not been paid since 30 October.

    So much for capital adequacy requirements then!

  2. The history of all these set ups and particularly the directors is well known. Councillor James Holmes who also is in local government (he represents Merton SW London as well as a string of failed companies), seems the be the main person to ask. He has an appalling record for running companies into the ground and leaving shareholders and stakeholders much poorer. If you do not believe me look up his record. His former colleagues include Craig Whyte and Simon Littlewood.

  3. My understanding would be that any regulated entity must apply to the FSA for cancellation of its authorisation and can’t just decide to “surrender its FSA licences”.

  4. Many more will go the same way, the real tragedy is that consumer choice of different types of investment is slowly but surely being eroded and we will see a lot more fund groups and providers downgrading their operations or even folding up altogether.

    The FSA has achieved at least one of its prime objectives, an inexorable decline in the financial services industry as a whole and despite its protestations, seems determined to make the provision of and payment for IFA services beyond the reach of the ordinary consumer.

    The recent publication by banks of their charging structures is frightening.

    Why should a consumer pay a fee to a bank for a limited range of products from a single provider, which most of the banks can only supply.

    Time the FSA upped the anti and instigated a publicity campaign extolling the virtues of IFA services which should in turn by part of the MAS publicity.
    Maybe then the public will see the value of our sector and ditch the banks offerings in favour of Independent Advice.

    It really is an awful mess these people have got us into.

  5. So glad I no longer work for MHFS as their link with Mcap was supposed to be a re-assurance. And they rarely paid us IFAs what they should when they should, always ‘errors at the bank’.

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