Beaufort Securities Limited (BSL) and Beaufort Asset Clearing Services Limited (BACSL) are placed into insolvency

Following an urgent application by the Financial Conduct Authority (FCA), the High Court has appointed Messrs Russell Downs, Douglas Nigel Rackham and Dan Yoram Schwarzmann of PricewaterhouseCoopers (PwC) as joint administrators of BSL and joint special administrators of BACSL.

The FCA took this action following an assessment of the financial positions of BSL and BACSL (the Firms) which led the FCA to believe that both Firms are insolvent.  The FCA also considers it necessary for insolvency practitioners to take over the running of the Firms in order to protect assets from dissipation and protect customers of both Firms.  This action is also necessary due to concerns that the Firms may be involved in financial crime.

The FCA is assisting the United States Department of Justice (DOJ) with its  investigation into BSL’s involvement in securities fraud related to stock of various US publicly-traded companies and international money laundering associated with that conduct.  The DOJ unsealed an indictment yesterday in which BSL, in addition to other companies and individuals, has been charged with securities fraud and money laundering violations.

The FCA has also imposed requirements on the Firms, with immediate effect, using its own-initiative powers under the Financial Services and Markets Act 2000 (the Act), requiring the Firms to cease all regulatory activity and not to dispose of any firm or client assets without the FCA’s consent.

The FCA also considers that the Firms are unable to satisfy the FCA’s threshold conditions of Appropriate Resources, Suitability and Effective Supervision.

The FCA is conducting an investigation into the affairs of both Firms and these actions have been taken to protect UK consumers.

Under the requirements imposed on the Firms on 1 March 2018:

·       The Firms must cease to carry on any regulated activity and any business activity that is carried on in connection with a regulated activity, or held out as being for the purposes of a regulated activity (including not initiating any further such business);

·       The Firms must not dispose of, deal with or diminish the value of any of their assets (whether in the United Kingdom or elsewhere) without the prior consent of the FCA; and

·       The Firms are also subject to an assets requirement over all the client money and safe custody assets they hold for clients with no provision for anything other than to settle unclosed trades.

The Firms must also take appropriate steps to inform their clients they will no longer be able to conduct any regulated activities.

The FCA’s investigation is continuing.