FSCS Investigates Claims Against Discretionary Fund Manager Linked to Cape Verde Hotel Scheme

The Financial Services Compensation Scheme (FSCS) is currently investigating claims against an Essex-based discretionary fund manager that invested clients’ funds in a high-risk offshore property scheme.

Central Markets Investment Management, which offered discretionary fund management and other services, including advice to trustees of small self-administered schemes (SSASs), has come under scrutiny. The firm voluntarily entered liquidation on 2 July, with Louise Baxter and Dominik Thiel-Czerwinke from Begbies Traynor appointed as joint liquidators.

On 14th August 2024, the FSCS confirmed that it is examining outstanding claims related to the business. However, the claims will not be immediately passed to the assessment team for review. The FSCS stated that it is still “in the early stages of investigating whether there are any claims against [Central Markets] that meet the qualifying conditions for compensation.” The exact number of claims under review by the FSCS remains unclear.

Since 2021, the Financial Ombudsman Service (FOS) has upheld 19 complaints against Central Markets, some of which were lodged by claims management companies (CMCs). All 19 complaints relate to investment advice provided by Central Markets to SSAS trustees, advising them to invest in The Resort Group, a well-known Cape Verde hotel developer.

The Resort Group has also been associated with the collapse of other pension schemes, including the SIPP provider Rowanmoor in August 2022.

In a decision made by the FOS in March, one individual transferred his Aegon pension into the hotel property scheme after being approached by an unregulated introducer that allegedly had an agreement with Central Markets. The ombudsman ruled that the advice was unsuitable, considering the individual’s risk tolerance, and noted that Central Markets was not authorised to provide investment advice to SSAS trustees, thereby “unlawfully promoting” the Cape Verde investment.

In a notice posted on the Financial Conduct Authority’s (FCA) website, the regulator advised clients of Central Markets to “proceed with caution” if approached by a CMC and to discuss the matter with the joint liquidators before taking any action.