Brooklands

The Brooklands SIPP Scheme

By The Enforcd TeamThe Enforcd Team

Brooklands Trustees Limited languishes on the Financial Services Compensation Scheme (FSCS) complex cases page. It was established in 2006, and operated subsidiaries in the UK, New Zealand, Dubai, Australia and Gibraltar. According to its insolvency practitioners, it acted as trustee to over 6,000 individual pension schemes worldwide. Because it operated self-invested pension plans, it was regulated by the Financial Services Authority, and its successor the Financial Conduct Authority. Its pension schemes were also registered with Her Majesty’s Revenue and Customs, and held funds of £650 million.

In August 2015, the firm recorded a liability of £1.6mn, rendering it insolvent. It transpired that the Financial Ombudsman Scheme had ruled against it in several complaints. Brooklands’ protestations that the complaints were the sole liability of the Independent Financial Advisors (IFAs) who had placed their clients’ assets with Brooklands, had fallen on deaf ears. Clyde & Co, a London firm of solicitors, advised that a judicial review of the Ombudsman’s adjudications would have less than a 50% chance of success.

The firm could not renew its professional indemnity (PI) cover economically, having notified its insurers who explained that the notification may have come too late. Without adequate cover, it could not accept new business.

A note in the insolvency practitioner’s report tells an all too common tale: Brooklands SIPP members were being charged annual management charges, for managing funds which may permanently remain illiquid, or remain so for a period of five to ten years.

The dispute with the PI insurers falls on the affected creditors (some 160 complainants at February 2017). Meanwhile, the firm’s Directors and Officers insurers were notified of the potential claim against them for late notification of the professional indemnity claims.

Looking at the firm’s shareholder register, 80% its shares were owned by BIP Group Distribution Ltd (officers Nigel, Julian and Paul Evans).

One of Brooklands’ directors, Paul Martin Evans, owns 70% of IVCM (Dubai). HPL, the buyer of the SIPP accounts and customer relationships, is paying his firm to provide ongoing administration support. IVCM offers SIPPs in the UK, Gibraltar, New Zealand and Australia. The accounts of UK registered IVCM Distribution Limited are currently overdue.

A look at the Financial Ombudsman Service’s Ombudsman Decisions page showed three complaints. One of these related to Stirling Mortimer. This was an operator of unregulated collective investment schemes, investing in “right to purchase” contracts in overseas property developments in Spain, Cape Verde, Mexico and Morocco. Redemptions are frozen and the enterprise is being investigated by the Serious Fraud Office.

The complainant had been advised by Birmingham-based Aspire Personal Finance, but this firm had become insolvent. IFA Paul Brian Reynolds was banned by the FCA and fined £290k (having earned commissions of £600k). He’d also convinced clients to take out mortgages on their homes, in order to buy geared traded endowment policies. Reynolds forged signatures, and documents to try to throw the FCA. He then moved to Dubai, where International Adviser linked him to Globaleye and Holborn Assets (Globaleye operates in much the same way as deVere Group). In 2016, he was sentenced for defrauding two insurance companies (he’d sold himself and his wife pensions, to generate commission payments of £65,000).

The National, an English language newspaper operating in the United Arab Emirates, covered the state of independent financial advice in a 2014 article:

British expat Pete Manzi, 54, says he ended up losing £11,000 (Dh65,462) on investments when he was hooked by a financial adviser.

“There is no one to go to,” says Mr Manzi. “I went to the administrator of the fund I was put into and they basically ignored me. They said tough luck. The problem in the UAE is that there isn’t a regulatory body and you can actually become a financial adviser without any qualifications. You can walk off the street and say you want to become one. So buyer beware, caveat emptor as my father used to say.”

Mr Manzi became a client of Dubai-based Globaleye after receiving a cold call in 2012 from an adviser offering to manage his £33,000 UK pension for him. Mr Manzi later sold all his holdings at a loss.

He says this is because after requesting to put 75 per cent of his investment into low-risk funds, 15 per cent in medium risk and 10 per cent in high risk, he discovered that all of his money had been transferred to a fund in Hong Kong without his permission – a fund that he was given no information about.

The article also featured deVere Group:

Kuben Naidoo, from South Africa, ended up with “a dud investment” that he claims was sold to him without highlighting important facts. These include the 25 years of management fees he would pay even if he chose to exit the plan early, a plan he says he was unwittingly locked into by a pushy adviser.

“I urge other expats to tread carefully when making long-term offshore investments,” says the married father, who had signed up with Zurich-based deVere.

In the meantime, Mr Naidoo says he is paying 1.5 per cent a quarter in fees on his investment plan, which translates into a 6 per cent annual fee – a rate that in the long run eats deeply into returns. Already he has paid more than $9,000 in fees in five years on an investment that’s valued at about $90,000. If he cancelled his policy today, he would lose about $36,000.

On top of that, the IT executive was told in 2012 that one of the funds he had invested most of the his money in had been frozen after a wave of redemptions.

He had been putting 50 per cent of his monthly contributions, or US$1,000 a month, into deVere’s Strategic Growth Fund, which promised investments into companies that sell baby food and pharmaceuticals, industries he was told would weather any downturn in the economy because people always buy food for their babies and drugs.

A spokesman from deVere said the only information he had on the Strategic Growth Fund was that it is a medium-risk fund, managed outside of deVere, and that it invested a small amount in private equity in 2012.

The Strategic Growth Fund was covered by the South China Morning Post in 2013, which proved that Nigel Green, Chief Executive of deVere Group, controlled the fund’s investment adviser.

British expats taking financial advice from other British expats should remember that UK protections do not apply to them. UK residents should remain wary of small pension SIPP providers and high yielding investments.