Kent-based wealth firm Full Circle Asset Management (FCAM) has gone into administration after being ordered by a court to pay out damages.
The company was ordered to compensate a client, who was seeking £1.8 million in restitution, although the amount due is still to be determined following another hearing.
The judgement was made on 1 December after FCAM was found to be in breach of both mandate and contract as it failed to apply 5% stop losses as agreed and maintain an appropriate risk profile of the client, retired businessman David Rocker.
Julie Swan, Samuel Talby and Mark Phillips of PCR are to act as joint administrators and their findings will determine whether if the compensation can be paid out of FCAM’s assets or whether the claim will fall onto the Financial Services Compensation Scheme.
PCR said in a statement: ‘The administrators are in the early stages of their appointment and are liasing with the Financial Conduct Authority in relation to the client funds managed by the company. All funds under management are held by third party custodians and do not form part of the company’s assets in administration.
‘The intention is to try and secure the future of the business as a going concern and in the intervening period, the existing investment team have been retained by the administrators to ensure continuity in relation to the fund management. We shall provide a further update in due course.’
Rocker was the in-house solicitor at Guinness in the 1980s when the company’s £4 billion takeover bid for Distillers turned into a major scandal involving stock market rigging and resulted in the conviction of four businessmen, including chairman Ernest Saunders.
Rocker became a client of FCAM in December 2005 and invested £1 million in its model portfolio. Between 2005 and May 2009, the portfolio rose by 34.6%. In May, he put an additional £1.5 million in the company’s Inner Circle (IC) portfolio, which he held until 17 March 2014.
According to the High Court judgement, Rocker claimed that a significant portion of the portfolio was put in highly risky investments, in a way that took his overall risk level above agreed limits.
During the period the performance of the portfolio declined and when Rocker cashed in his investment, the value had shrunk to £681,443. He also claimed FCAM failed to operate stop losses.
However, FCAM argued Rocker was a sophisticated investor who was kept fully informed and that the claims were made in hindsight following a period of poor performance.
The defence said he was attempting to ‘recoup investment losses through unmeritorious allegations of breach of duty by FCAM. The “bearish” strategy adopted with the full knowledge and consent of Mr Rocker turned out to be lossmaking and Mr Rocker lost money. That is unfortunate, but is inherent in the risks taken in investment’.
Rocker’s claim that he also suffered a £861,182 opportunity cost loss was rejected.
FCAM, which is open to clients with a minimum of £250,000, is led by chairman John Robson and managing director Andrew Selsby.
In July 2011, the then Financial Services Authority (FSA) received a customer complaint, upon which it initiated a section 166 review. The review raised serious concerns around the company’s approach to risk and the suitability of its model portfolio.
While 55 recommendations were made for the company to address there was no fine or reprimand following the s166 report. However, according to the FCA register, from 7 December 2015, the company has not been allowed to advise retail customers on investments, nor arrange deals in investments.