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Strand Capital – What Went Wrong?

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London-based Strand Capital is a Discretionary Fund Manager (DFM), which went into voluntary administration in May 2017 after it was revealed that it was experiencing financial difficulties.

According to the Financial Services Compensation Scheme (FSCS), there are a number of negligence claims against the firm which may refer to unsuitable self-invested personal pension (SIPP) transfer advice.

What is a DFM?

DFM’s create bespoke portfolios of investment bonds for customers, where their money is invested across many different schemes.

These DFMs have control over where the client’s money is invested as long as it fits their predetermined suitability agreements. However, concerns were raised that some of the money that Strand Capital was managing may have not been invested through appropriate channels – and could have been invested in high risk or volatile schemes, usually only meant for people who could afford to lose the money.

To date, the FSCS has received 126 claims against Strand Capital, and the FSCS has stated that it was aware that FCA-authorised advisers may have recommended customers invest with Strand Capital or that they transfer their existing pensions into a SIPP.

3,000 customers facing uncertainty

When Strand Capital collapsed into administration, around 3,000 customers were plunged into uncertainty regarding their investments.

The FSCS has so far been able to compensate around 2,000 of the clients whose money was held with Strand Capital Limited, which has cost £6.3m.

Why did Strand Capital collapse?

When the firm went into administration, it was confirmed that the company’s controlling party, Optima Worldwide, no longer wanted Strand Capital Limited as part of its group. The firm’s financial statements published in March 2017 showed that the firm had been facing financial difficulties reporting a loss after taxation of £204,975 for 2016, compared to a loss of just £17,627 for 2015.

Upon the administration announcement, the Financial Conduct Authority (FCA) warned that if clients were short-changed as a result, claims may fall on the FSCS. Subsequently, the FSCS declared Strand Capital Limited in default and opened the door to payouts.

FSCS statement

In a recent statement on its website, the FSCS says that they have recently made further payments to customers who had client money with Strand, and all claims made against Strand Capital Ltd have now been moved to their claims processing team for assessment.

Anyone who has been advised by FCA-authorised advisers to invest money with Strand is being urged to complain to the adviser, and if the claim is rejected, they need to take it to the Financial Ombudsman Service (FOS). After adjudication from the FOS, customers can then take their claim to the FSCS.

So what went wrong?

On this occasion, FCA-approved advisers were caught out advising people to invest money managed by Strand Capital. Unfortunately for investors, some of this money had been invested into high-risk schemes that are extremely volatile and not meant for the average investor who can not afford to take the financial hit of heavy losses.

DFMs invest money across a broad portfolio of investments, which essentially spreads the risk. In this case, these advisers did not apply the appropriate levels of care when it came to advising their investors. Many of those mis-sold were normal, hard working Brits, simply looking to build a secure pension pot or invest money for the future.

If you think you may have been given unsuitable advice and invested money through Strand Capital, you can get in touch here for a chat with one of our advisers.