Financial advisor possible fraud.

Financial advisor possible fraud.

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I act for an elderly couple who have invested a substantial amount of money in an off shore Investment Trust through a local so called financial advisor.

Interest was supposed to be paid in April 2009 but to date no sign, the advisor says the fund have not paid the money over to him.

I rang him to day on behalf of the couple and he said that the Investment Trust which is an international Multi Million pound trust had asked him to sell a house on the trusts behalf to release funds. I pointed out that that was an unsual move by an Investment Trust and asked him to give me the address of the property, he did not seem to know the address when I pushed him for the address saying that I was going to check with the land registry he put the phone down.

Does anybody know if it is usual for investment trusts to hold back interest payments and if not is it worth contacting the local CID before he disappears.

Any advice welcome as the financial bod always seems slow to act.

thanks in advacne for any comments

Replies (14)

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David Winch
By David Winch
12th Oct 2009 15:26

Alarm bells ringing!

This worries me, frankly.  Do you or your clients have any third party documentation to show that this investment was actually made by the financial advisor?  Did the funds pass through his hands?

You might like, as a first step, to phone the consumer advice line of the FSA on 0300 500 5000 to check this guy is actually a registered financial adviser.

However the FSA do not investigate and prosecute fraud.

You could then, as step 2, phone the local police as you mention.

If you are an accountant in practice (as I assume you are) a report to SOCA is mandatory where you suspect fraud such as this.  That is step 3.  You can report online at

http://www.soca.gov.uk/financialIntel/suspectActivity.html

Look for the link to SAR Online under the heading 'Electronic Reporting'.

You can flag your report as urgent by using the XX code XXS1XX at the head of the 'white space' free text area of your report.  See

http://www.soca.gov.uk/financialIntel/SARglossary.html

If you are not already registered for online reporting with SOCA then set aside the rest of this afternoon to get yourself regaistered and submit your report.  It can be a little time consuming the first time!

I would advise that you both contact your local police and submit a report to SOCA because of the serious risk to your client here, which requires the most urgent attention.  (It is not the late interest that worries me - I fear the capital may never have been invested at all and has gone on the financial advisor's fast women and slow horses.)

I do hope these suspicions prove to be unfounded and all is well - but act without delay just in case.

David

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By User deleted
12th Oct 2009 17:41

many thanks

Thank you very much for your detailed and prompt reply. I spoke to the local police and they said it is a civil matter and the client must consult a solicitor.

I am new to reporting but very encouraged by your assistance.

thanks again

 

 

 

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David Winch
By David Winch
12th Oct 2009 18:21

The police and suspected fraud

I note that the police say it is a civil matter.

If your client and the financial advisor simply have a dispute about how much should be paid to the client and when, that is indeed a civil matter and the police should (and would) steer well clear of it.

On the other hand, if it is suspected that the financial advisor has been dishonest and has put the client's money to an unauthorised use in flagrant contravention of instructions to invest it in a particular way, that is fraud / theft and it is appropriate for the police to log the complaint and follow it up as they see fit.

The same is true if the financial advisor has invested the money as directed but has dishonestly pocketed the interest due to the client. (Although I find it hard to believe that a reputable Investment Trust would accept an investment in the name of the client but then pay the interest on it to the financial advisor and not direct to the client.)

Are you (or the client) able to contact the managers of the Investment Trust and confirm (i) the investment has been made in the client's name, and (ii) interest on it has not yet been paid out?

The 'explanation' offered to you by the financial advisor beggars belief.

The problem is that the police have many demands upon their time and limited resources.  They are given priorities by government and financial crime comes a long way down the list.  They have few officers / civilian staff with the expertise and abilities to deal well with financial crime.

I have to say that, "It's a civil matter" is sometimes a knee-jerk reaction from police who wish to avoid accepting any responsibility.  Since, on that basis, there has been no crime and so no reported crime there is also no unsolved crime and no need for any action to be taken by the police!

The key issue, of course, concerns the safety of your client's savings (and perhaps those of other people who have used the same financial advisor).

If you still have real concerns about the safety of your client's money then I would urge you to press on with the other steps in my original posting and, if you wish to get the police to look at your complaint against the financial advisor properly, put it in writing addressed to the Chief Constable of your local police force at constabulary headquarters (making it clear that you suspect the client's monies may have been dishonestly misappropriated).  That will, at least, result in the police logging the complaint on their system for further evaluation (hopefully) by someone with appropriate skills and experience.

In your letter to the Chief Constable you should set out (if it is the case) that the loss of these funds will have a major impact on your clients who are old / vulnerable persons and that the suspected theft / fraud is a significant breach of trust on behalf of someone who, as a financial advisor, would be expected to maintain the highest standards of honesty and integrity.  Also point out the ongoing risk to the public posed by a dishonest financial advisor.  (The reasons for stating this is that these statements are likely to 'push the buttons' on some of the criteria which the police may use in deciding whether the case is worthy of some investigation / action.  As you can appreciate a theft of, say, £100,000 perpetrated against, say, Barclays Bank is small beer but a theft of the same amount from Mr & Mrs Biggins of 25 Acacia Avenue could be devastating.  The police, quite properly, take that into account in prioritising their investigative resources.)

You should attach to your letter copies (not originals) of any documents available to support your allegations (such as copies of relevant correspondence your clients have received from the financial advisor and confirmation (if you have it) from the investment managers that the investment has not been made).  Also refer to any results you have had from contacting the FSA Consumer Line re the status of the financial advisor.  Do stick to relevant stuff - don't sent a wheelbarrow load of documents!  But if you can buttress your points and hand the case to the police 'on a plate' it may help sway their decision to follow it up.

Of course the role of the police is to investigate crimes, prevent further crime, and gather evidence with a view to criminal prosecution of offenders.  They are not primarily going to concern themselves with helping your clients to recover their money.  Debt collectors they ain't!  However they do have powers to obtain information and to restrain assets (e.g. 'freeze' bank accounts) which, as a by-product, might improve your clients' chances of recovering their money.

David

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By snopes
12th Oct 2009 18:26

If the local police ...

...think that fraud is a civil matter what do they think their fraud squad is there for?

ebenezer cuckpowder

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David Winch
By David Winch
12th Oct 2009 18:43

The fraud squad

Ebenezer

You might be interested to know that, outside the City of London area, the number of police officers predominantly engaged in the investigation of fraud and financial crime has been falling progressively for some time.

David

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By snopes
13th Oct 2009 07:21

No doubt...

...the reduction in fraud officers was implemented as part of an efficiency policy with the objective of providing higher levels of  customer service and satisfaction.

 

ebenezer cuckpowder

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David Winch
By David Winch
13th Oct 2009 08:36

Fraud squad officers

Ebenezer

Fraud squad officers are generally to be found working in back offices and in plain clothes.

What, according to the politicians and newspapers at least, the public want is uniformed police officers on the streets giving highly visual reassurance of personal security.

Chief Constables recruit, retain, train and deploy their manpower with that in mind.

Organisations which are frequent targets for fraud, including HMRC, DWP, local authorities, banks and insurance companies have the resources to protect themselves from fraud (if they choose to do so) without relying upon the police.  That is what they do.

Individuals are not in the same position to be able to protect themselves.

David

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By User deleted
13th Oct 2009 09:23

So grateful

I am so grateful to you for taking so much trouble to assist me with this thank you so much

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By David160
13th Oct 2009 13:50

Should we always check with the regulatory authority?

Do you think that when we need to do business, or on behalf of clients, with professionals, eg solicitors, financial advisors, accountants etc. that we should always, unless we already know them, contact the appropriate regulatory authority to get confirmation that they are on the register and their disiplinary record?

Whether they are, or are not, may affect whether any compensation is payable.

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David Winch
By David Winch
19th Oct 2009 21:23

Checking on recommended advisers

I do not think in this case the accountant had originally recommended the financial adviser to the couple who followed his investment advice.  So your point does not apply to this case.

However if you are going to recommend a financial adviser to a client I do think you are at some risk if the adviser turns out to be entirely bogus and disappears with the client's money in circumstances where an elementary check on your part would have revealed that the adviser was not registered with the regulatory authorities.

That is a long-winded way of saying that I think before you recommend a financial adviser you should confirm with the FSA that he is authorised to give financial advice. 

I would not go as far as saying you should check his disciplinary record.  Nor would I say that you are liable if a reputable adviser gives advice which turns out to be poor or even negligent.

(Although of course some firms are apparently facing claims where they recommended clients to invest with Bernie Madoff - notwithstanding that he appeared to be a reputable and regulated investment guru.)

David

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By User deleted
20th Oct 2009 10:54

make a complaint

The only way forward is to make a police complaint.

I suspect your clients have lost their money ! The price of entrusting your financial affairs to any tom dick or harry.

Unfortunately the system is designed to encourage this type of crime and you will find the police an expensive waste of more time.

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By User deleted
20th Oct 2009 13:09

appreciate interest

thank you all for your comments, an update, so far I have been unable to establish whether or not the fa is a member of FSA. I received a call to say that they are still dealing with back log but will let me know asap.

The client says that the trust moved from IOM to Bahamas.

Is it at all possible that a fund that has paid out on the due date for the last 20 years could suddenly stop paying the interest ?

I did not have anything to do with the placing of the investments they have been in place for over 20 years and are renewed each period normally 5 years. It is only since the original fully registered FA retired 18 months ago and

passed on the business to the present agent that there has been a problem.

I do so much appreciate your support on this.

The capital invested is £400k which is the couple life savings.

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David Winch
By David Winch
20th Oct 2009 15:13

Summary view

I think it would be useful to establish what are known facts - and by known facts I am excluding (for the moment at least) uncorroborated assertions from the new financial adviser.

It would also be useful to consider what further facts might be ascertainable without too much effort (again excluding unsupported information from the FA).

In that connection, how does the client know the fund has moved from IOM to the Bahamas? (Was he told that by the FA?)

Is there documentation to show that the investment fund have the £400K?  Is it possible for you or the client to contact the fund direct to confirm this?  Is there information about the fund on the internet?  Do you know a 'tame' stockbroker or IFA who could dig out for you some information for you about this fund?

To whom do the investment fund pay the interest? (Apparently to the FA rather than the client. Why?  Is the investment held in the name of the client or the FA?)

Can you or the client contact the fund managers direct and confirm that the April interest has not been paid out?

I appreciate that you are awaiting further information from the FSA concerning the regulatory status of the new FA.

 

On the one hand, times are hard and it is conceivable that the investment is genuinely suffering lower returns which have resulted in a missed payment.

On the other hand, the story which you were told about the instruction to sell a property is simply not credible (and that is very worrying).

David

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David Winch
By David Winch
21st Oct 2009 19:23

Getting a conviction

There was an interesting case which concluded in Manchester Crown Court today with the offender being sent to prison for his part in an insurance fraud.

Essentially he was involved in numerous staged road traffic accidents, typically low speed accidents on roundabouts.  He would brake suddenly causing the following vehicle to collide with his.  A claim would then be submitted to insurers for damage to the vehicle and personal injury.

He offered this as a service to car owners who would then assert that they had been driving at the time and claimed for the damage and injury they said they had suffered.  You could hire him for £500 - but not any more!

The guy's undoing was that he staged many of the accidents at the same favourite spot of his.  That roundabout was overlooked by an office and the office-workers noticed the same guy being repeatedly involved in accidents - sometimes twice in the same day.

The insurers identified 93 accidents in which they believed he had been involved.  They assembled a dossier and submitted it to the police who followed up by arresting the offender and bringing him to justice.

He was sentenced to four and a half years.

The BBC report is at http://tr.im/Cz8r

David

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