A lottery winner who invested £250,000 in Arch Cru is facing substantial losses after her financial adviser went out of business, only to re-emerge as a new firm months later.
Kingsway Financial Management of Tyne & Wear had been looking after the investor's affairs quite satisfactorily for the previous six years before it invested her in the fund range, the Daily Mail reports.
However the advice to invest a quarter of a million pounds in Arch Cru has left the investor with heavy losses after the fund range was suspended in 2009.
Kingsway went out of business in 2010, meaning the investor has no access to the Financial Ombudsman's £150,000 compensation scheme, or the FSA's latest £40m redress scheme, which both only apply to active firms.
The advisers who recommended Arch Cru for the investor are now back trading as Argent Wealth Limited.
However the investor can still only apply for redress from the Financial Services Compensation Scheme, which has compensation capped at £50,000.
Kingsway Financial Management was part of the Alpha to Omega network that was forced to stop trading in January 2010 by the FSA because of evidence that its advisers were not offering investors suitable advice.
Although Kingsway collapsed as soon as Alpha to Omega stopped trading, its directors, John Hardman and his son David, set up Argent Wealth within three months. It is not suggested that Kingsway went out of business to avoid future compensation claims.
Kingsway also advised the investor to put money into another high risk investment, Integrity Maximiser, by borrowing £350,000.
David Hardman admits that in total Kingsway advised four clients to invest in both Integrity and Arch Cru while a further five invested more than £100,000 in Arch Cru.
Despite investing such large sums on behalf of clients, he insists that he has done no wrong and that he is not guilty of poor advice, according to the Daily Mail.
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