Useless Financial Ombudsman and FCA plus Defective Insolvency Regime

The stock markets are in turmoil now everyone is back from their holidays and facing up to the realisation that with high inflation and looming recessions the stock market may not be the best place to be for investors. I have moved more into cash and more defensive shares but cash is not the place to be for very long when inflation is eroding its value by more than 10% per annum. Stocks are getting cheaper as the short-term speculators and inexperienced investors exit so there will soon be bargains to be had while there are still few good alternatives when banks are paying less interest than inflation and fixed interest bonds are collapsing in capital values as interest rates rise.

I have written before about how useless the Financial Ombudsman is after I complained about the time it took to complete a transfer of a SIPP from one platform to another – see https://roliscon.blog/2022/04/28/the-financial-ombudsman-is-useless/ . It took over 5 months and I complained to the Financial Ombudsman about the delays in May 2021. After lengthy correspondence and an initial offer from the sending platform which I rejected as derisory, they have accepted that there was an unnecessary delay of 9 days at one stage in the transfer process. The Ombudsman has now proposed compensation of £350 for the inconvenience caused and £139.75 for the loss of investment return. This I have reluctantly accepted although my complaint about the receiving platform is still outstanding.

It has therefore taken 15 months to resolve the complaint which I do not consider reasonable. But the key problem is the Financial Conduct Authority (FCA) not laying down strict rules about the time to complete transfers of investment holdings as they do for bank accounts. Both the FCA and Financial Ombudsman are toothless in essence and do not provide reasonable protection to investors.

ShareSoc has just issued its latest Informer Newsletter to members and it makes for a good read. One good article is on 4D Pharma (DDDD) which recently went into administration. This company claimed to be “a world leader in biotherapeutics” but it was a typical jam tomorrow story company. I never held the shares so I cannot judge whether the claimed prospects were realistic or imaginary but it does appear to have been very badly managed such that it ran out of cash. Unfortunately shareholders have no recourse against incompetent or inept directors.

But the key point to highlight is the typical wildly excessive costs of the administration which has run up costs of over £580,000 in just a few weeks. Shareholders should never expect any return from an administration and this case is no different. There may be some assets (mainly IP) in the business but after the administration costs and settling debts, there may be nothing left.

The insolvency regime needs major reform. At present the big beneficiary of administrations are insolvency practitioners who to a large extent can do what they want and charge what they want. The insolvency regime seems to have been designed for the benefit of the insolvency profession. I suggest the regulations in this area should be totally reformed and administrations should be a court supervised process as per Chapter 11 in the USA.

Another article in the ShareSoc Newsletter is on Blancco Technology Group (BLTG) in which I did hold a few shares for a while. There was a complaint to the FCA about the accounts of this company which were grossly misleading and the auditors (KPMG) have been fined £3,500 with costs of £2,743. A derisory and disgraceful outcome and another example of how weak the financial regulators are in the UK.

Ultimately the cases of 4D Pharma and Blancco reinforce the point that you should never invest in a company unless you have absolute confidence in the prudence and ability of the directors.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Missing Dividends and the Small Claims Court

There is an interesting article in today’s FTMoney supplement about the merits of pursuing claims using the small claims court versus the financial ombudsman. The former seems to be both quicker and more effective from the comments of FT readers. My own experience of using the small claims court a few years ago was likewise positive. I complained about a headboard delivery from Dreams and after some lengthy correspondence I filed a claim in court, which is very simple to do electronically, and promptly received a response from their finance director resolving the issue. A letter from a court clearly grabs attention. To show there was no hard feelings as a result we recently ordered two new beds from Dreams and are totally satisfied with both them and the delivery process.

I mentioned the problem of missing dividends on a company held in two different ISAs back in November – see https://roliscon.blog/2018/11/21/missing-dividends/ . They have still not arrived. I could complain to the Financial Ombudsman but it might prove to be best to file a claim in the small claims court instead. I’ll give the ISA suppliers a final warning before doing so but I am certainly losing my patience over the matter.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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