Almost all of the 42 investors had no background in financial services and were looking for a safe place for their money.
Many of the investors put their life savings – ranging from £25,000 to £100,000 – into one of two specialist funds that were ‘widely marketed’ in the Island by a local firm of independent financial advisers now trading as SWM Synergy.
The court was told that a number of the investors were already past retirement age and those who were working were ‘ordinary people’ on average salaries who subsequently lost an average of between 21% and 36% of their investments.
Although a few made some money after redeeming their investments early, others lost every penny they had put in.
They included a divorced mother with two daughters in higher education earning £30,000 a year; an elderly man in hospital who wanted to put money aside for long-term care, who lost all £25,000 invested; a 69-year-old who entrusted £100,000 to the fund but received only £79,000 in return; a couple in their 60s who were looking for a better rate of return but ended up losing 36% of their savings; and an ambulance manager in his 40s earning £25,000 a year who put £70,000 into a fund but ended up losing £16,000.
The court heard that a report by advisory firm Grant Thornton, commissioned by the financial services regulator, had concluded that SWM had effectively ‘mis-sold’ investments to clients because the products they had been sold were too sophisticated for their investment knowledge and requirements.
This week’s hearing considered an application by SWM Synergy to stall the sending out of letters to the investors, ahead of the firm’s appeal early next year against directions issued by the financial services regulator.
The Jersey Financial Services Commission wanted the letters to be sent out at this stage to enable the investors to take any possible action and to advise them of the findings of the Grant Thornton report.
Crown Advocate Beverley Lacey, for the commission, said one woman who had invested £46,000 in 2007 made a 36% loss when she redeemed her investment in 2012, receiving only £29,000.
The advocate said it was ‘understandable’ that the woman’s husband had contacted the commission asking whether the couple were likely to recoup their losses.
‘Any funds lawyer, looking at these products, would see immediately that they are expert funds and not for retail investors,’ she said.
‘These are ordinary people, many of them retired, and 34 of them do not know about the issues relating to their losses.’
Of the eight who had already been approached by Grant Thornton, she said, one woman had assumed she could do nothing because she had ‘signed the form’, and another did not want to complain in case it would ‘upset’ the advisers.
The advocate said that the investors in the Matrix and PATF funds had been assessed on their investment needs some months after the money had been handed over.
‘None of them had had the risks of the investments explained,’ she said.
Earlier, counsel for SWM, Advocate Olaf Blakeley, submitted that to send letters to investors at this stage was ‘premature’ and that the investors should be informed of the ‘full picture’, rather than the ‘one-sided’ view presented in the letters that the commission had edited.
Advocate Blakeley said SWM wanted to commission their own ‘independent’ report and advice, but had not been permitted to do so, even though the directors had offered to pay for this from their own personal funds.
‘We know that investments were made as early as 2004, 11 years ago,’ he said.
‘We also know that investments failed in the 2008 financial crash – but so did Lehman Brothers, and RBSI.’
The advocate said that all the clients were already aware of their losses and that the firm had kept them regularly updated.
The Deputy Bailiff, Tim Le Cocq, sitting with Jurats Geoffrey Fisher and Geoffrey Grime, said that ‘some prejudice’ to the case might follow if the letters were sent out at this stage, adding: ‘We do not at this point see any benefit in sending the letters to the investors and, accordingly, order the stay requested.’
