Kent-based wealth firm Full Circle Asset Management (FCAM) has been told to pay out to a client who was seeking £1.8 million in damages.
David Rocker, a retired businessman, took the company to court claiming that FCAM was in breach of contract when managing his medium risk portfolio.
The judge found FCAM in breach of mandate as well as contract each time it failed to sell an asset which lost more than 5% of its value. The judge, Justice Morris, stated that the precise calculation of the quantum should be agreed between the two parties. If they cannot, he will hear further arguments.
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 Rocker 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 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.