The Falcon Group Limited (Falcon), now owned by advice firm Lighthouse Group PLC (Lighthouse) since 2008 has had over 15 FOS decisions upheld against it relating to unsuitable pension advice, often involving the same series of UCIS investments on offer from Merchant Place Property Partnership, or involving Splash Broadcast investments.
UCIS Property Investments and The Falcon Group
In simpler terms, UCIS stands for Unregulated Collective Investment Scheme, meaning that the investments are NOT regulated by the Financial Conduct Authority. Often characterised by a volatile and illquid nature (can be difficult to sell and values often fluctuate). property schemes are a good example of this, and the particular series of investment funds on offer from Merchant Place Property Partnership are no different – considered high-risk due to the aforementioned reasons, and the lack of compensation available from the FSCS should they go wrong.
In the majority of upheld Ombudsman decisions relating the The Falcon Group Limited/Lighthouse Group PLC, the funds were invested in via a SIPP, a self invested personal pension which can allow access to such high-risk investments.
But as detailed in the FOS decisions, the advice regarding several Merchant Place Property Partnership funds was considered unsuitable by the Ombudsman, meaning Falcon/Lighthouse were made to pay the clients financial redress.
Most of the cases rested on the fact that the complainants were not suitable for high-risk and unregulated funds, on the basis they were not Sophisticated Investors, or High-Net Worth Individuals and should not have been exposed to the risk associated with commercial property funds, at home or abroad.
The Ombudsman said of some of the Merchant Place Property Partnership funds (namely MP34, Mp40, MP51, MP51b and MP65) that “these investments began to encounter difficulties. In some cases there has been total or near total loss of initial investment for Mr C” (FOS decision DRN3386870).
Falcon/Lighthouse Example 1: MP60
Mr C invested in both Merchant Place 60 “which was an unregulated collective investment scheme” and later 64 after receiving advice from Falcon through his SIPP (self-invested personal pension).
“Merchant Place 60 was a geared commercial property investment in a German Shopping Centre”.
“Merchant Place 64 – which was another UCIS. Again, this was a geared commercial property investment, this time into German nursing homes.”
“Mr C has complained [he was given unsuitable advice by The Falcon Group limited to invest £65,000 of his pension into Merchant Place 60”
“There must be doubt that Mr C accepted or understood the level of risk he was taking by investing in Merchant Place 60.”.
Mr C won his case against the advice of Falcon/Lighthouse, and was paid redress.
Falcon/Lighthouse Example 2: Splash Broadcast
“Mr B has complained about the advice he was given by The Falcon Group Limited in 2009 to invest £40,000 of his pension in Splash Broadcast“.
Splash Broadcast Ltd was dissolved following liquidation in 2013.
“Splash encountered difficulties. Mr B later became aware he could or would lose most if not all of the money he invested in it”.
Falcon denied providing advice for Mr B to invest in Spash, having provided advice on the SIPP only, however the FOS said that “the transfer to a SIPP, leaving funds uninvested, was unsuitable.”
On these grounds the FOS ordered Falcon to pay Mr B fair compensation.
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