In a final notice published on 2 June, the regulator rejected Adam Benskin and John Halley’s application to create a company called Independent Family Advisers (IFAL), noting the application states Strabens Hall is facing “inevitable insolvency” due to £1m in claims over ill-fated investments in the collapsed Connaught Income funds.
The FCA said the attempt had the “hallmarks of phoenixing”, a widely used administrative tactic of setting up a firm to allow company directors to escape personally footing the bill for a failed firm’s liabilities.
Strabens Hall is facing up to £1m of liabilities to eight customers who complained to the Financial Ombudsman Service (FOS) about advice to invest in the unregulated Connaught Income Series 1 Fund. The firm invested a total of £7.9m in the beleaguered fund.
Legal dispute
In its application to the FCA, Benskin and Halley admitted that Strabens Hall is facing bankruptcy. The pair wanted permission for IFAL to acquire the firm – including its assets, staff and clients – so it could pursue an ongoing legal dispute with its professional indemnity (PI) insurer, which has so far cost the firm £100,000.
Benskin and Halley said in their IFAL application that a win against their PI insurer would fund the compensation to clients ordered by FOS, rather than having the Financial Services Compensation Scheme (FSCS) pick up the tab.
“It lacked an appropriate recognition of the gravity of the anticipated circumstances of Strabens Hall’s failure and the consequences it could have for consumer creditors,” the FCA said.
However, if the buyout was authorised it would also mean IFAL would not have to pay the firm’s anticipated liabilities.
Not ‘fit and proper’
Describing IFAL as not “fit and proper”, the FCA accused the directors of undermining “public confidence” in the compensation system operated by the FOS and the FSCS.
“It also lacked an appropriate recognition of the gravity of the anticipated circumstances of Strabens Hall’s failure and the consequences it could have for consumer creditors,” the regulator said in its final notice.Top of Form
