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PRESS RELEASE 28 July 2010


The Commission issues this press release following the revocation of the licence issued to Belgravia Asset Management Limited (in liquidation) (“BAM”), a company wholly-owned by Belgravia Financial Services Group Limited (“BFSG”). This press release also provides an update on the Commission’s investigations into the financial standing and organisation of BAM.

BAM was established as a Jersey company on 7 July 2004. BAM was registered as a Fund Services Business under the Financial Services (Jersey) Law 1998, as amended (the “FS Law”), to act as a Manager (class U), Investment Manager (class X) and Member of a Partnership (class ZJ). Prior to 14 November 2007, BAM was regulated for equivalent classes of business as a fund functionary under the Collective Investment Funds (Jersey) Law 1988, as amended (the “CIF Law”).

BAM acted as manager of several property funds investing predominantly in the UK and Europe and performed the role of general partner and investment manager to a fund investing in gold and resources related companies.

2008 Onwards
The Commission conducted an on-site examination of BAM in January 2008. BAM's then management failed to provide satisfactory answers to questions relating to its financial standing and organisation. As a result, by Notice under Article 32(1)(a) of the FS Law dated 2 May 2008, BAM was required to provide answers. In addition, Directions were issued to BAM under Article 23(1) of the FS Law preventing the take-on of any new business and requiring BAM to provide advance notice to the Commission of any intention to sell, transfer, dispose or acquire any asset of the funds to which it provided services.

At this time the Commission was advised that two property funds managed by BAM had suspended dealings due to illiquidity in the funds.

Mr. Duncan Hickman the Managing Director of BAM died unexpectedly on 2 May 2008. Prior to and after his death several investors in certain Belgravia funds had written to BAM to requisition Extraordinary General Meetings (“EGMs”) with a view to replacing the board of directors. (The Commission understands the rationale for this was to effect a change in manager).

On 12 June 2008, injunctions were obtained by BFSG and others (including BAM) preventing certain investors from exercising their right to convene EGMs. BFSG alleged several persons (including principal persons of Belgravia-related entities) had conspired to take-over the management of certain funds from BAM and related parties.

In May 2008, the Commission was made aware of negotiations regarding the transfer of the business of BAM to a subsidiary of a UK-listed company. As noted in the press release dated 11 August 2008, the Commission had not granted regulatory approval to any proposed transaction between BFSG and First London Securities plc. The proposed transaction was never completed.

The Commission remained concerned over the financial standing and organisation of BAM and apparent breaches of the Codes of Practice for Fund Services Business issued under the FS Law (the “Codes of Practice”). Therefore, on 21 August 2008, the Commission served further Directions on BAM (under Article 23(1) of the FS Law), preventing any transfers of assets without the consent of the Commission and prohibiting the destruction or removal of records.

The Commission's press release dated 2 September 2008 stated that senior members of the management team at BFSG had been removed and replaced by the shareholder, Barclays Private Bank and Trust Limited, who hold the shares as trustee. By that time a criminal investigation had been commenced by the Joint Financial Crimes Unit of the States of Jersey Police and the Commission understands this investigation continues.

By press release issued on 5 September 2008, the Commission explained it had issued further Directions on BAM on 1 September 2008. Those Directions required all issues, redemptions or conversions of any shares, limited partnership interests, units or holdings of all classes in all Belgravia funds, including all sub-funds and cells thereof, to be suspended with immediate effect. Directions were issued pursuant to Article 13(1) of the CIF Law and Article 23(1) of the FS Law, by reason of the Commission's concerns that:

a. each of the Suspended Funds was without adequate or effective management or financial or accounting controls; and
b. the true and correct value of the investments or other assets of the Suspended Funds could not reasonably and reliably be ascertained by the managers.

By Order of the Royal Court of Jersey on 15 September 2008, on BAM's application, BAM was placed into liquidation on the basis it was just and equitable to do so and liquidators were appointed. BAM then assumed a “caretaker” role. In December 2008, BAM was replaced as general partner and investment manager. In June and August 2009, replacement managers were appointed to two of the property funds.

BAM ceased to provide services to the remaining funds in 2010.  BAM no longer conducts fund services business and its licence has been revoked.

Summary of Findings
As a result of the Commission’s on-site examination and information received, the Commission considers it appropriate to set out the matters of concern identified to date, namely:

  • Inadequate and inappropriate corporate governance of BAM.
  • Significant monies were loaned on an unsecured and interest-free basis to related parties without regard to the intended use of the monies or ability to repay.
  • Records were not maintained identifying the source of certain monies received or payments made. Lack of proper accounting records and oversight contributed to BAM failing to maintain adequate financial resources.
  • The Commission was not notified of the true financial position of BAM.
  • Intermediaries and introducers were appointed and acted in relation to the funds without procedures in place and there was no effective oversight by BAM of certain activities performed in relation to the funds.
  • Land sites were included in valuations when legal title had not been acquired.

In addition to the above concerns, the Commission is not satisfied BAM complied with the following principles of the Codes of Practice in that a registered person must:

1. Conduct its business with integrity.
2. Have due regard for the interests of the Fund.
3. Organise and control its affairs effectively for the proper performance of its business activities and be able to demonstrate the existence of adequate risk management systems.
4. Maintain, and be able to demonstrate the existence of, both adequate financial resources and adequate insurance.
5. Deal with the Commission and other authorities in Jersey in an open and co-operative manner.

Present Position
The Commission’s investigations are multi-jurisdictional, which has added to the complexity and time taken. BAM’s licence has now been revoked. The Commission's investigations into the former activities of BAM and associated persons continue.

- Ends -

For further information please contact: -

Barry Faudemer - Director Enforcement, Jersey Financial Services Commission
Tel: + 44 (0) 1534 822137
Fax: + 44 (0) 1534 822001

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