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Investor complaints mount against Beaufort Securities

Investor complaints mount against Beaufort Securities

by Jack Gilbert Mar 12, 2018 at 10:58


Collapsed City stockbroker and investment manager Beaufort Securities has racked up 600 complaints at the Financial Ombudsman Service (FOS).

Last week Beaufort Securities, which held £850 million of client assets at the time, fell into administration. It came after the United States Department of Justice published an indictment in which Beaufort Securities and other companies and individuals were charged in relation to 'securities fraud and money laundering violations.’

The indictment revealed how an FBI agent worked undercover at Beaufort Securities to investigate a ‘pump and dump’ share scheme. The defendants also proposed the FBI agent could purchase a painting by Pablo Picasso as part of a money laundering scheme. 

The FOS has now revealed it has received around 600 complaints about Beaufort Securities. These complaints are understood to be completely separate to the FBI investigation. 

In one FOS decision published last March, which was upheld against Beaufort Securities, a complainant lost £71,000 in Alternative Investment Market-listed investments.

As Beaufort has now been declared insolvent these 600 FOS complaints may be later passed to the Financial Services Compensation Scheme (FSCS). When asked, a spokesman from the FOS said: ‘We still have the complaints at present’.

In a separate statement the FSCS said it was working with the firm’s administrators, PricewaterhouseCoopers (PwC) to ‘to understand what this [the firm’s collapse] might mean for these firms’ customers’.

The FSCS has not yet declared Beaufort in default. If it did, investors would need to claim via the compensation scheme rather than the FOS and any successful claims would result in payouts.

Financial advisers face claims

Financial advisers are also facing claims over their use of Beaufort Securities as a discretionary fund manager for their clients.

Last October Citywire's New Model Adviser® revealed Beaufort Securities had written to investors encouraging them to claim against their financial advisers over its own investment products.

The firm directed clients to use claims firm Legal Force to see if they had grounds for a compensation claim against their adviser for recommending they invest in Beaufort Securities.

Simon Helliwell, director of Legal Force, said he currently had around 200 complaints being made to the FOS and FSCS relating to six financial advice firms which were using Beaufort. Helliwell said these claims concerned the suitability of investments clients were placed in.

One of these advice firms is now-collapsed Welsh firm Grosvenor Butterworth which closed last November following a voluntary variation of permissions at the behest of the FCA.

Administration challenges

Last week administrators PwC said it had ring-fenced £50 million in client money accounts and frozen £850 million in client assets.

PwC added that with client assets ‘there are a number of open positions and transactions which need to be resolved and concluded. This may impact the total once a final reconciliation takes place’.

Nigel Rackham, joint administrator of Beaufort Securities said ‘this is a significant and complicated insolvency’ and as there were very little available funds at the firm the ‘costs of returning client money and client assets will in all likelihood be deducted from clients' recoveries’.

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