The UK’s Financial Ombudsman Services ruled that advice firm Helm Godfrey Partners gave its client Ms T unsuitable advice when it recommended she invest in the New Earth fund.
As a qualifying investor fund (QIS), New Earth should only have been promoted to professional investors, which the Ombudsman agreed Ms T was not.
Helm Godfrey advised on a portfolio worth £1.78m, of which £155,000 ($206,130, €173,314) belonged to Ms T and the rest to her husband.
“Therefore, the QIS represented 16% and was a significant proportion of her wealth,” the ombudsman wrote.
“In my opinion, she didn’t have the necessary expertise, knowledge and experience to appreciate the risks she was taking by investing in a QIS. In particular, she had no experience of speculative investments or indeed specifically industrialised facilities that specialised in recycling waste management.”
The ombudsman concluded: “I think the investment was too high risk and Ms T wasn’t warned about the risks involved.”
Compensation
In determining redress, the ombudsman said his aim was to put Ms T as close to the position she would probably be in now had she not been given unsuitable advice.
Helm Godfrey was ordered to compare the performance of Ms T’s investment with that of a benchmark provided by the ombudsman and pay the difference plus simple interest of 8%.
The advice firm was given until 21 August to accept or reject the decision. No update was available.
New Earth collapse
The high court of justice of the Isle of Man granted a wind-up application for three unregulated funds, known collectively as the New Earth Group of Funds, in July 2016.
In a letter to shareholders in June 2016, The Premier Group, which managed the New Earth Group, advised that it was unlikely that a sale of assets would generate a return for the fund.
