Intrinsic are forced to pay out three Harlequin FOS cases.
In the past year, the Financial Ombudsman Service have asked for compensation on behalf of 3 clients from Intrinsic in relation to Harlequin investments after finding the representatives had given mortgage advice that was unsuitable to investors in the problematic overseas property group.
The FOS have upheld 4 complaints involving mortgages and the property scheme in the past year, three of the four have been Intrinsic's responsibility to pay out.
In each of the three cases, the Ombudsman has stated that the decision was not based on the actual move to invest in Harlequin as that would be investment advice, it was the interest only mortgages that were offered by Intrinsic as a repayment vehicle for the investment, these mortgages were highly inappropriate and risky for the nature of the investment.
Around 6,000 mostly British investors pumped £400m into the unregulated overseas property scheme through UK financial advisers and many released cash from their homes in order to fund the investment.
Such consumers were hoping for 'guaranteed returns' of 10 per cent a year from their luxury villas that never came due to the company heading into insolvency in 2016 and then shortly after, went bankrupt.
The Serious Fraud Office are now investigating the scheme and as a result of mis-selling, the boss of the scheme is due to stand trial for three counts of fraud in 2019.
In a FOS decision upheld in June, it was decided that clients were given unsuitable advice to take out an interest only mortgage to fund their Harlequin investment.
A couple that had their case upheld with the FOS, had met with TBG Financial Services Ltd, who were an appointed representative of Intrinsic, in order to discuss mortgaging options back in 2008 so that they could invest in Harlequin.
These clients were advised to take out an interest only mortgage to release funds. The ombudsman thought the investment was not a reasonable means to ensure the mortgage was repaid.
The ombudsman have stated that the adviser would have been aware that the reason the couple had sought a new mortgage was for Harlequin and known that it was a risky investment.
Whilst the adviser did not give investment advice, they should have thought about how the mortgage was to be repaid and that the nature of the investment was unsuitable for the client and raised concerns about the security of the repayment strategy.
There was a similar case upheld in July with a pair of clients who were also unsuitably advised to borrow on an interest only basis to invest in Harlequin. It was also found that this repayment strategy was unsuitable and too risky.
The Ombudsman said: "I believe the adviser ought to have highlighted the potential repayment risks more specifically to them. The documentation showed that income from the sale of the investment property was the recorded means of repaying the debt."
The Ombudsman have ordered Intrinsic Financial Planning to pay £29,000 to represent the additional borrowing taken on an interest-only basis used to fund the deposit, alongside interest payments, fees paid originally and £750 for the trouble.
The third case that has landed on Intrinsic's doorstep was back in February. The Ombudsman ordered Intrinsic to repay the difference between the additional amount the client borrowed on an interest only basis plus £750 for the clients trouble.
The Ombudsman have said that the 'suitable' advice to give to clients looking to invest in Harlequin would have been a repayment mortgage as the investment was too 'risky' for an interest only mortgage.
If the advisers had done this, the repayment mortgage would have been paid off by now.
Recently, the Harlequin cases have been in relation to Self-Invested Personal Pensions, however some were told to take out a mortgage for their properties in order to invest in the scheme.
If you have invested in Harlequin either by transferring to a Sipp or taking a mortgage out and would rather have someone handle your case and write it for you plus submit it to the relevant compensation scheme, get in touch with us, we can run you through the process if you are unsure.
The information in this article has been sourced from: https://www.ftadviser.com/mortgages/2019/09/16/intrinsic-to-pay-out-over-trio-of-harlequin-fos-cases/?page=2