The Financial Services Compensation Scheme (FSCS) has begun contacting clients of failed firm Tailormade, which was a major distributor of troubled overseas property company Harlequin Property.
Tailormade, which has an IFA arm, an alternative investment business and a self-invested personal pension (SIPP) arm, called in liquidators RSM Tenon in September because it couldn't finance redress payments to unhappy clients.
The FSCS said it is continuing its work to establish the extent to which it may be able to compensate customers of the company.
As part of this work it has sent application forms to a small number of customers.
According to a statement from RSM Tenon in September, Tailormade ceased taking on all new business as of 20 January and began to conduct a review of the systems and processes it had in place for advising clients.
That review identified certain clients where redress was due, which in turn created a liability for the company which it could not meet.
Initially Tailormade said it had only stopped taking new money into Harlequin in January, following a Financial Services Authority (FSA) alert about the investment.
Harlequin - which has taken about £400m from investors to invest in properties across the Caribbean - has been rocked by problems since the start of the year, including three warnings by the regulator, investigations by the Serious Fraud Office and the Insolvency Service, and its sales arm going into administration.
Advisers and agents selling clients investments in villas run by Harlequin received commissions of up to 15%, according to Regulatory Legal partner Gareth Fatchett, who represents hundreds of Harlequin investors in their bid to save the troubled scheme and get their money back.
Claims made by Tailormade clients to the FSCS will ultimately be paid for by advisers through levies.
The advice community is already likely to be billed for a £30m interim levy early next year, mainly covering the cost of the Catalyst Investment group failure, which was declared in default in October.
The FSCS said in November that it faced a shortfall of £29.5m in the investment intermediation sub-class, which it will claim in the first quarter of next year.
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