Advice firm Citimark Partnership had argued their client was happy with the level of risk, investing 10% of his portfolio into unregulated collective investment schemes (Ucis).
According to the Financial Ombudsman ruling, “Mr C” complained the Ucis was something he never would have agreed to invest in.
Citimark argued Mr C understood the risk and had signed a waiver categorising him as a sophisticated investor with previous experience of such schemes.
Ombudsman Keith Taylor, however, noted that the client was classed as preferring medium risk investments and that the proportion of his portfolio was too concentrated in the New Earth fund.
Mr C said he was not aware any previous involvement in unregulated investments.
Medium risk investor
Ordering Citimark to pay redress, Taylor agreed with the complainant that he was not a sophisticated investor and that other cautious investments did not make his overall portfolio balanced.
“The business (Citimark) has said that Mr C’s asset allocation still provides him with a medium portfolio,” said Taylor.
“They have said he has low risk funds that counter against the high risk Ucis investment and Mr C understood that for growth, these investments were needed.”
Taylor agreed with the adjudicator who made an earlier determination, “that a spread of only low risk and high risk funds doesn’t necessarily equate to a medium risk portfolio”.
“While I understand that need for diversification and the spread of risk, the Ucis investments were speculative and the investment in the New Earth Fund meant the total percentage of his portfolio invested in Ucis was too high. I don’t think this was suitable for a medium risk investor.”
On top of paying the equivalent as if Mr C had invested in the FTSE, Citimark were ordered to pay £200 compensation for the trouble and upset.
Wound up
New Earth’s owner Isle of Man-based Premier Group went into liquidation last June when its three Ucis were wound up. One fund invested in Nicaraguan bamboo plantations, another in UK recycling centres.
Around 3,250 investors put £292m ($378m, €328m) into the funds, the majority of whom fear they will lose all or a significant part of their money.
