Aberdeen-based firm, Midas Financial Solutions (Scotland), which was run by Alistair Greig and Ian Towe before it went bust last year, is currently under investigation after millions of pounds of investor savings went missing.
Midas allegedly told investors it had set up a deposit scheme with the Royal Bank of Scotland where their savings would gather interest at a better than standard rate.
However, Police Scotland sent letters to the 200 investors towards the end of last year telling them it was evident that “money invested in this scheme is not where it should be” and a large-scale financial fraud investigation was underway.
One letter sent out to investors in October, which has been seen by I, said Midas was not authorised by the Financial Conduct Authority (FCA) to accept deposits and as a result the scheme was not regulated. “This means the scheme is not afforded the protection provided by regulated products, including recourse through the Financial Services Compensation Scheme,” it said.
The letter said police would have to gather “a considerable amount of information” from the banks and from all the investors involved in the case, which means the enquiry would “take some time to complete”. Some investors have come together to form a group in the meantime.
“Operating illegally”
Midas had previously been authorised by Sense Network, which acted as an appointed representative to the independent financial advisers, but the advisory network ended its relationship with the firm in August last year.
Sense Network has since sought to escape liability by claiming it was unaware of the actions of Midas’ IFAs, who allegedly acted outside the scope of the agreement.
The advisory network responded to International Adviser’s request for comment by saying: “We can confirm that Sense has never been authorised to conduct deposit taking. Any adviser undertaking such activities would have been operating illegally and outside of the authorisation provided by Sense.”
“Hanging in the wind”
One investor – who did not want to be named – spoke to IA about his experience after both he and his mother lost a total of £150,000 through the scheme.
He said the proposal seemed “very true and trustworthy” and highlighted that the firm had been authorised by the FCA – via Sense Network – at the time he deposited his savings. But when he asked his adviser, Allan Milne, to take his money out of the scheme, Milne said there was a problem.
“There are a lot of elderly people who put their money in the scheme, and some have lost their entire life savings with no relatives to fall back on,” said the man in his 40s.
“It seems Sense weren’t doing what an authorised network should be doing and got out as quick as they could as soon as things started to go wrong.”
“I think there needs to be a change in the way the FCA works so that the consumer is better protected,” he said. “I thought this would be the kind of situation where the FCA would protect the consumer, but they have left some people hanging in the wind.”
The FCA said: “Unfortunately it is not an issue we can comment on but we would encourage investors to contact Police Scotland who are looking in to this issue.”
“Unsatisfactory and disappointing”
Specialist law firm, Regulatory Legal Solicitors, is advising investors to take claims to the Financial Ombudsman Service in the first instance, and will progress to the High Court action or a judicial review to clarify the law if necessary.
The firm said: “It is most unsatisfactory and disappointing that this is a situation where investors believed they were receiving advice through regulated means and thus had the associated regulatory protections, but there is now an attempt to take them outside the scope of regulation and deny them access to redress.
“There is a recurring theme recently arising from networks such as Sense – they seek to avoid liability through technical interpretations which in turn will cause significant detriment to consumers.”
It added: “If Sense is not held liable, this will undoubtedly be a decision which is contrary to both established case law and the intentions of parliament.”
