Law firm Regulatory Legal, which is also representing investors in the beleaguered Harlequin investment vehicle, is acting for the investors with the aim of obtaining compensation.
The funds, which have since been suspended, were sold by advisers at RSM Tenon, acquired by Baker Tilly last year.
They include the unregulated Brandeaux Student Accommodation Fund, which was delisted from the Irish Stock Exchange last month, as well as the Ground Rents, and Dual Assets funds, which were suspended along with Brandeaux’s entire fund range last July.
Tobias Haynes, paralegal at Regulatory Legal says the unregulated, high risk funds were sold to characteristically low risk investors, with advisers exploiting their lack of financial knowledge.
“These are everyday people that have been caught up in something that they don’t really know anything about,” he said. “They had only heard good things about the products. They thought they could put everything into the product and were guaranteed some sort of return.”
“These sorts of unregulated products should only be made available to high-risk investors.”
“There are some who have invested as far back as a decade ago, but it is only now that the funds have come into question in this manner. The problems started in 2008 and the funds have continued to go downhill from there.”
He said each remuneration case will be dealt with by the Financial Ombudsmen Service and are likely to be met with success. However, due to a £150,000 threshold on cases handled by the Ombudsmen, there is a likelihood that high level investors will have to take their case to court.
He added that the suspended funds are likely to close.
Haynes reiterated that it was not Brandeaux itself, but the advisers who sold its funds, being examined: “There are tonnes of these cases that happen on a day to day basis and usually it turns out to be the advisers rather than the company once the FCA investigate.
“We do not think these are fraudulent products. It is a shame that they went under, but that is the problem with these unregulated high risk products tailored to high risk individuals.
“Eventually, specific advisers will be made an example of, and it will be interesting to see if the FCA gets involved in this case.”
A spokesperson from Baker Tilly said is was "professionally inappropriate" for the company to comment at the present time.
'Problems with market liquidity'
Last month, Brandeaux announced in its update to investors that it was to delist its Student Accommodation Fund from the Irish Stock Exchange.
It said it had taken the decision to “give as much flexibility as possible” around the various options available to it, as well as acknowledging the position advisers are placed in when explaining the situation to clients.
This followed the suspension of all of Brandeaux’s funds last July. At the time, the company said it was suspending the British Virgin Island-domiciled funds because of problems with market liquidity and pressures from investors wishing to redeem their investments.
It said there is a “great deal of uncertainty” in the student accommodation market, “created by over £2bn of student accommodation property”. It added that this had caused a “considerable ‘overhang’ accounting for over 20% of all privately owned UK purpose built student accommodation property”.
Updated 29/4/214 to include Baker Tilly's new statement.
