Regulatory Legal said the cases are now ready to proceed to the Financial Ombudsman and Financial Services Compensation Scheme services, after it warned last month that it planned to pursue compensation from advisers in relation to the cases.
Tobias Haynes, a paralegal at the company, said the claims are likely to succeed, as seven recent cases brought to the Financial Ombudsman had been ruled in favour of the investors.
Haynes said the situation was unusual in that, often in cases where investors have lost their money in high risk, non-regulated products, the fund turns out to have been subject to fraud or other severe mismanagement. In this case, the product was simply compromised by natural market forces.
The first tranche of cases Regulatory Legal will be bringing are all less than £150,000 – the most either the Financial Ombudsman or Financial Services Compensation Scheme is able to pay out. For cases above this, for which Haynes said there were “a few”, Regulatory Legal will pursue advisers in court.
Asked whether the advisers being pursued for the claims would be able to pay, Haynes said two are large organisations – Baker Tilly, as reported, is one – the other being UK financial advisory network, Sesame.
Brandeaux suspended its entire fund range in July last year, following adverse market movements. At the time, the company cited problems with liquidity in the student accommodation sector for the decision, explaining that there was a “great deal of uncertainty, created by over £2bn of student accommodation property in the market”.
This has since been contested by other student accommodation fund managers in the market, most notably by Coral Portfolio’s John Kennedy.
However, there have since been further suspensions. In October, Mansion Group suspended its Channel Islands-listed Student Accommodation Fund, this time citing a significant rise in net redemptions.
Following the suspension, former investor John Greenwood of Isle of Man headquartered Creechurch Capital, hit out at the management strategy of the fund, saying investors had gotten used to unrealistic returns, but that the sector itself remained robust.
Haynes revealed Regulatory Legal is currently in discussions with a number of potential clients which had invested in the Mansion Group fund and that it seems some investors have holdings in both products.