Following discussions with the UK’s regulator, the company, which has both a fund management and a wealth management arm, has agreed to stop carrying on regulated activities except in relation to existing contracts, and will not take on new clients or transact new business for new or existing clients.
The Financial Conduct Authority said the company agreed to the terms at the end of last week because it is in “financial difficulties” and wishes to “appropriately protect” its clients and creditors.
The company’s board had appointed insolvency practitioners Leonard Curtis and legal advisors DWF to look at its business model but has now appointed administrators to assess its position going forward.
HCS stated last year that a significant equity capital injection would be required into the company in 2015 but found that the costs of the business are too high and its revenue too low to resolve a capital shortfall to the FCA’s satisfaction.
“Whilst the pipeline of potential new business across all divisions is now looking stronger than it has for some time, the timing of potential revenue receipts is nevertheless too far out or too uncertain to tide the business over in the short term,” it said.
“The Board has therefore reluctantly concluded, after consulting with the cornerstone investors and debt providers who have supported the business to date, that an underwritten fundraising at a level likely to provide the requisite capital and satisfy the company’s primary regulator for its authorised business is not commercially viable.”
Fair treatment
Under the terms of the Voluntary Application for Imposition of Requirement agreed with the FCA, the company cannot initiate or accept new clients, dispose or deal with any of its assets, or carry on business that involved the carrying on of a regulated activity unless it has had the regulator’s express prior written consent.
Additionally, the FCA has ordered that the company must not deal with or release client money unless it has been approved.
HCS said it will “act in accordance with the FCA’s expectation to ensure the appropriate protection and fair treatment” of its existing customers.
The regulator added that clients may have access to the Financial Services Compensation Scheme, the compensation fund for the UK advice industry, if they are unable to receive back the full amount of their investments.
HCS was formed in 2007 with a team managing hedge funds, pooled funds for clients of IFAs and separate accounts, with a capital markets business admitted to trading on AIM in 2010.
