Customers of shuttered wealth management firm WealthTek LLP could see pay outs from the Financial Services Compensation Scheme, its investigators have said.
The protection scheme for customers of failed financial services firms said some claims against the collapsed Newcastle company are likely to meet qualifying conditions for compensation. In a new update, the FSCS said it was working with WealthTek's administrators and although it is not open to new claims now, it is investigating the exact extent of what can be covered.
WealthTek was ordered to close earlier this year by the Financial Conduct Authority (FCA) which said it was investigating the firm and its founder John Dance over potential regulatory breaches relating to client money and custody assets, and criminal offences of fraud and money laundering. Special administrators from BDO have since found a £81m shortfall in client money.
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The FCA said that WealthTek, which had about 1,470 clients and also traded as Vertem Asset Management and Malloch Melville, did not have permission to hold client money or custody assets. BDO said investigation of the company's books showed it was managing total client assets of about £233m at the time of its collapse.
Now, in a signal that it will pay out against claims, some of those clients could stand to receive up to the maximum £85,000 per claimant allowed under the FSCS. And potential claimants are being urged to remain cautious about scammers that may try to take advantage of WealthTek's special administration.
In its update, the FSCS said: "We expect that there will be some claims that meet the qualifying conditions for compensation. Investigations are continuing to determine the exact extent of what can be covered. FSCS will not be opening to customer claims right now.
"We are liaising with the administrators on a regular basis. As more information regarding WealthTek becomes available through their ongoing work, FSCS will continue to review the situation."
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At the end of May, the FCA said it had obtained a worldwide order to freeze up to £40m of Mr Dance's assets in case some may potentially be used for distribution or confiscation following the conclusion of any civil or criminal proceedings it brings.
Dead Vibey Leisure Limited, a firm founded by Mr Dance and two other partners, which ran the Lofts and the Hustle nightclubs in Newcastle, later went into administration.