Investors line up legal claim against former network AR
Original article here
A group of investors who lost money in an allegedly fraudulent investment scheme connected to a former authorised representative of the Sense Network have engaged a law firm to investigate a potential group legal action against the advisers who marketed the scheme.
Investors in the scheme, which is connected to former Sense member Midas Financial Solutions Scotland, were alerted to the fact their money was lost in October via a letter from the Scottish police force.
The Aberdeen-based scheme is being investigated by police, who have now spoken to the majority of the roughly 180 people that had various sums of money invested. It is thought more than £10m was invested in total.
They were originally informed that unauthorised deposit taking, which is what the scheme was said to be involved with, is not afforded the protection given to regulated products, including recourse to compensation via the Financial Services Compensation Scheme.
The Financial Conduct Authority said investments made via a network of local advisers associated with Midas was not covered because they were not authorised to accept deposits.
Colin Stewart, whose parents were among the investors estimated to have lost money in the scheme, has become chairman of the group aiming to bring a legal action against Midas. They have employed a law firm to work on an ‘assessment of merit’ for a group action.
So far 29 people have signed up and paid £250 each to Cubism Law. The group has taken evidence of various investments made by seven individuals that are representative of the wider group, with the assessment to be produced within the next four to six weeks.
Speaking to FTAdviser, he warned that investors face a statute of limitation of six years, which he believes has started counting down when people initially invested, rather than when the police investigation was launched.
A further six investors have signed up with legal services firm Regulatory Legal out of a wider group of 49 people trying to get their money back.
Mr Stewart urged more investors to come forward and join his group, but admitted that many people - particularly fishermen rumoured to have around £1m each invested and various offshore workers - were put off by the initial police communication, which stated they should not seek recompense until after the criminal case was brought.
The letter, sent by Police Scotland to investors and seen by FTAdviser, stated a “criminal investigation” is being carried out by the Economic Crime Unit in Aberdeen, after it was passed information by the regulator following its own earlier investigation in August.
Another member of the group, Alex Lucas, was advised on numerous financial products by Midas, including three mortgages, a managed fund Isa and two life assurance schemes, and was paid out the sum of £83,660 from the deposits scheme in December 2011 to purchase a property.
He questioned how Sense allowed Midas and its directors to deal in the deposit accounts for so many years, accusing them of having “failed in their duties” towards investors.
Steve Young, chairman at Sense, previously told FTAdviser that his understanding was that the scheme was not operated by Midas, but by an individual via a separate business. “As a consequence, this falls entirely outside of our AR relationship with Midas,” he added.
Midas was a Sense AR from September 2007 until August 2014, although the relationship was ended without knowledge of the FCA investigation, according to Mr Young.
Responding to the latest developments, he added that no one has been in touch with the firm since last October. Sense was not subject to the investigation by the FCA, and is not included in the ongoing probe by Police Scotland.
“It will be important to see what the police come up with,” Mr Young added.
The police did not respond to requests for an update.