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The FSCS has released a statement that says it expects to pay over £50m in claims regarding Costa Rican investment Ethical Forestry, an article in Citywire has stated.
The unregulated timber investment had at least 3,000 UK investors, many of which have invested over £18,000 into the high-risk scheme via SIPP pension schemes.
While the investment is unregulated by the FCA (denying investors compensation simply for the investment going into liquidation), it appears some investors may have invested their pension funds on the basis of negligent or unsuitable advice on the part of a regulated financial adviser, and it is on THIS basis that the FSCS may be able to pay compensation, and indeed already has in some cases.
The FSCS Pot
The Financial Services Compensation scheme is there as a final safety net, and in cases where compensation may be due to consumers because of poor advice, it steps in when an advice firm is no longer trading, or is unable to pay their client compensation themselves – often this is when a string of bad advice from the same firm has meant there are no more funds left to pay, leaving the FSCS to pick up the tab, capped at £50,000 per individual, per case against an IFA.
SIPP Provider Valuations
In brighter news for those making claims against advice regarding their Ethical Forestry investment, the FSCS added that they will not let “book value” valuations from some SIPP providers stand in the way of compensation for investors.
As part of the claims process, the FSCS will write to the consumer’s SIPP provider to ask how they value the current investment. In the case of Ethical Forestry, despite the investment being in liquidation, Liberty SIPP has chosen to value the investment at “Book Value” – the amount originally paid by the investor, meaning that the claimant may receive less compensation from the FSCS, or none at all.
The FSCS has now said that it will ‘disregard’ these valuations for Ethical Forestry, opening the door to further compensation by valuing them as “uncertain”.
The latest on Ethical Forestry
Letters from the liquidator are still few and far between, however it is understood from correspondence between HJS Solutions and investors that a deal is still being worked out with the ‘preferred buyer’ who is still trying to secure funding from a bank.
In the meantime, the proposed Damage Report from the recent hurricane that hit Costa Rica is still not forthcoming.
If you haven’t investigated the prospect of your own Ethical Forestry claim yet, we can help you get started with a FREE initial assessment, where our specialist claims handlers will delve into your case to see if you may be entitled to compensation, all on a No Win – No Fee basis*.