Joss Hargrave, of Bird & Bird LLP, told International Adviser that there was – as the Financial Conduct Authority noted on 24 December, when it issued a supervisory notice against the company – “a shortfall in client monies,” so that it is “possible that they [Hartmann’s clients] may lose money”.
It is too early to tell how much, if at all, he added, as the investigation into the problems at Hartmann Capital are ongoing.
“The primary pooling event crystalised a statutory trust over the client monies, which are pooled across various client money accounts of the company,” Hargrave added, referring to the automatic combining of client money that was triggered as a result of the FCA supervisory notice.
“[The client funds] are ring-fenced, but this does not mean that there may not be [a] loss.”
On the other hand, he added, the advice of the special administrators, UHY Hacker Young, to put the company into special administration rather into liquidation, as Hartmann’s board was originally advised to do, “saved the company and its clients money", and is expected to “hugely cut down on the delay in returning [the clients’] monies”, because special administration was the more appropriate course in this instance.
Hargrave’s comments came in response to written questions submitted by IA, and coincided with the release of a statement today by the joint special administrators of Hartmann, which informed investors that they may expect to receive an update from them by the 24th of January.
The statement, which was addressed “to all known clients” and posted on the company’s website, also revealed that the joint administrators are “in discussions regarding a potential sale of certain aspects of the company”.
No details about the potential sale were given, but will be “if matters proceed”, the statement, which appeared on the company’s website today, although it is dated 10 January, added.
Until the end of 2011, Hartmann Capital was known as Lewis Charles Securities.
Hartmann Capital is a London-based investment company and discretionary accounts manager, the products of which have been sold abroad as well as in the UK. As reported, it was placed into special administration on 3 January, in the wake of a Financial Conduct Authority “supervisory notice” against it that was posted by the FCA on Christmas Eve.
The FCA cited “shortfalls” in the company’s client money accounts.
Since that time, there has been no information about why Hartmann Capital ran into difficulty, or how much investors with assets held in its accounts may expect to receive back, or when.
Hargrave said the reasons for Hartmann's difficulties were being investigated “now”.
“The simple answer [is that] the chief operating officer [of Hartmann, Sean Downey] uncovered a circa £1.5m shortfall in client monies,” he added. “This was reported to the FCA, [which] eventually stopped the company from trading, and instigated the primary pooling event.”
‘Reviewing position of each client’
In the statement posted today, joint special administrator Andrew Andronikou said little that has not already been released already about the Hartmann Capital case, beyond the fact that he is “in the process of reviewing the position of each client to ensure the client accounts have been reconciled prior to any transfer of client assets, and/or client monies, that are being held in the company’s account, and also in the company’s CREST facility.”
CREST is a UK currency settlement system.
“I envision being in a position to provide an update to the clients within the next 14 days,” Andronikou added.
He noted that under UK regulations, a special administration aims to ensure the return of client assets “as soon as reasonably practicable”; “ensure timely engagement with market infrastructure bodies and the authorities, pursuant to [the relevant regulations]; and “to either rescue" the entity in question as a going concern, or "wind it up in the best interest of creditors”.
