The custodian and administrator for Merchant Capital has ended its relationship with the structured product provider amid a review of Merchant Capital’s business and claims the division could be wound down.
Merchant Capital is the structured product arm of Merchant House Group, which also owns IFA business Merchant House Financial Services.
Reyker Securities took over as custodian of Merchant Capital assets after Pritchard Stockbrokers was suspended by the FSA from regulated activities in February.
In a notice published on its website on 21 December, Reyker says: “This notice is to advise all clients and IFAs that with immediate effect Reyker has terminated its contract with Merchant to provide various services to that firm or to its parent Merchant House Group.
“Reyker will be making no comment about the reasons for this other than to say we have consulted fully with the FSA in advance of taking this course of action. The FSA has also had prior notice of this information to investors being sent out and posted on our website. Reyker is taking this action in the belief it is in the best interests of both investors and the firm.”
The notice goes on to say Merchant is still required to pay for the custody and administration of historical plans.
Reyker says the Merchant Capital FTSE Select Quarterly Income plan and the Merchant Capital FTSE Select Defensive Kick Out plan were both oversubscribed and that Merchant had not secured enough of the investment product to satisfy demand.
The company said it expected to notify advisers about the status of plan applications before the first week of January.
A separate letter to advisers and brokers, dated 12 December and seen by Money Marketing, said Reyker had taken over as plan manager for the two plans named above as Merchant Capital has agreed with the FSA to wind down this part of its business.
The letter says: “This letter is to advise you that Reyker, as of yesterday, has taken control of the allocation, settlement and future management of the above plans for which your clients have made investment applications on your advice. These plans are due to settle imminently.
“Reyker has taken this step to, once again, provide market stability and minimise disruption to investors and IFAs. It arises because Merchant Capital has recently agreed with the FSA to vary its regulatory permissions and wind down its business in an orderly fashion over approximately the next two months.”
A Merchant House spokesman declined to comment on the suggestion that Merchant Capital was winding down. He says: “Merchant Capital is reviewing its business model to determine its future approach to the structured product market.”
Reyker and the FSA declined to comment.
Parent company Merchant House Group cancelled trading on the Alternative Investment in November after the company failed to raise sufficient funding to restore trading.