Merchant Capital has warned some of its clients may suffer losses due to an ongoing Financial Services Authority (FSA) investigation into its custodian company Pritchard.
This is contrary to a notice released to the market on 13 November stating that Merchant Capital's parent company Merchant House Group (MHG) did not believe the group or clients would suffer financial losses as a result of the probe.
Dorset-based Pritchard had been acting as custodian for all client monies related to advisory firm Merchant Capital's structured products division.
A spokesperson for Cairn, the nominated adviser to MHG, said although the company was looking to conclude affairs with custodian Pritchard as soon as possible, it was not yet clear whether clients would lose money as a result of the ongoing case.
"At present we are not sure what level of assets are still with Pritchard and how liquid they will be," he said.
"We are trying to provide the market with accurate information but there is currently no certainty one way or the other," he added.
The notice follows a release from the FSA on 10 February which said because Pritchard had failed to arrange adequate protection for its client's assets, and allowed client money to be used on its own account, it was no longer permitted to carry out any of the regulated activities listed in its part IV permissions.
Merchant Capital is making arrangements for an alternative custodian.
Pritchard had 28 days from 10 February to refer the matter to the Upper Tribunal and can also make written or oral submissions to the FSA.
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