Financial Services – case study

• Sector – Financial Services
• Number of clients – 11,000
• Client assets – over £400million

Situation

The company was regarded as an investment bank under the regulations, because of the manner in which it dealt with investments and the fact that it held assets and monies on behalf of clients.  It operated from two locations and through a large number of agencies, had approximately 11,000 corporate and private clients, the vast majority of which were members of the public, and handled assets worth hundreds of millions of pounds on behalf of its clients.

Approach

Mazars began advising the directors shortly after the company was effectively forced to cease trading by the Financial Services Authority (“the FSA”). Amongst other things, the FSA was concerned that the company had failed to provide adequate protection for clients’ assets and had allowed client money to be used on their own account and not that of clients.

Prior to our appointment the directors sold to another firm of stockbrokers certain assets, including customer lists and client stock assets. None of these stock assets, however, were actually transferred by the directors, as they should have been, prior to our appointment. Consequently, we had to deal with the detailed reconciliations and transfers of clients’ stock assets with a value of approximately £400 million over the next few months.

A major part of our work has also involved investigations into client monies held by the company and a significant shortfall in those monies. Detailed reconciliations were carried out on all client records to identify amounts actually owed to all 11,000 clients, to ensure the return of as much of this category of client assets as soon as practicable in line with one of the objectives of the special administration.

During this process we worked closely with the FSA and then the Financial Conduct Authority (“the FCA” ), and regularly reported the findings of our investigations and the manner in which we have dealt with client assets.

We also assisted the Insolvency Service with their investigations into the conduct of the directors. Two directors of the company were fined and banned from the financial services industry by the FCA for recklessly failing to protect client money, and the Managing Director and Financial Director were also disqualified as directors for 8 and 6 years respectively for causing the company to both mislead the then FSA and to trade in breach of financial rules and regulations regarding the use of client monies.

Impact

As a result of our extensive investigations, all potential recoveries were maximised and a significant settlement in relation to a dispute was also realised.

Get in touch

If you would like to speak with a member of our Restructuring Team, please click the button below to submit an enquiry

Contact us today