There has now been over £16 million paid out in claims by the Financial Services Compensation Scheme (FSCS) against the collapsed advice firm Cherish Wealth Management.
Last December, an investigation by New Model Adviser® uncovered how the advice firm was responsible for £7 million worth of pay outs from the FSCS. Since December, nearly 1,600 clients have had claims upheld against the company, resulting in the FSCS bill increasing to £16 million. Of this £16 million, £11 million are SIPP claims, and £4.2 million are personal pension transfer claims.
It was discovered that Cherish Wealth Management were advising clients to invest in unregulated investment schemes, and some of these schemes were created by the firm’s founder, Steven Wright. Wright left Cherish Wealth Management in November 2011, and the advice given to invest in these schemes was given after this time.
Most of the investments were overseas-based property investments, including Brisa Investments, Lakeview UK Investments, Invest US, and Tambaba Investment.
These FSCS pay-outs are expected to further increase, with 188 claims are still under investigation, and other clients with successful claims are still waiting to see if they can claim money back from unregulated investments. If they cannot, their compensation payments will be higher.
This particular case raises questions for the Financial Conduct Authority, as just one small firm was responsible for a large number of claims.
There have been a total of 1,973 claims against the firm, 1,589 of those have been upheld, 188 are in progress and 187 were rejected.
The FSCS has not valued all the investments down and not paid out the full compensation for the investments yet, which is why the total pay-outs are relatively small. However, if the FSCS does value more investments down, the pay-outs are likely to increase.
Since the report by New Model Adviser®, some more information has come to light.
In November, the auditors for Tambaba Investments and Brisa Investments resigned, stating; “we do not believe that sufficient and appropriate audit evidence will be available in order for us to report on the company’s financial statements for the year ended 30 March 2017.”
New auditors have now been appointed, but in the accounts for the investments the auditors highlighted a shortage of information from the firms that the schemes lent money to.
A spokesman for Write said; “Decisions about its investments in any product it selected, in accordance with the rules that apply to a regulated financial services company, were clearly its own decisions. If Cherish failed in those duties, it has nothing to do with Wright.”
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