Administrators for Beaufort Securities today revealed they have frozen £800m in client assets as the stricken stockbroker faces legal action in the US and an insolvency ordered by regulators in the UK.
As many as 14,000 investors could recover around 85 to 90 per cent of their money, although they may have to wait months.
Beaufort was made insolvent on Friday after the Financial Conduct Authority (FCA) suspended all regulated activities at the firm following an indictment of the company in a $50m fraud and money laundering case by the US Department of Justice (DoJ).
The DoJ alleges the defendants used “pump and dump” schemes to manipulate share prices, before trying to launder the proceeds of the fraud through the purchase of a Picasso painting, “Personnages, Painted 11 April 1965” in the name of an undercover US agent.
Beaufort’s offices in Bristol and Colywn Bay in North Wales have been closed, while the 80 total job losses so far have also affected the City offices.
Accountants PwC have identified £50m in segregated client money accounts plus £800m in assets held by custodians Euroclear, although they said customers may lose money to pay for the insolvency. PwC has been granted special administrator status by the FCA to give it extra powers, such as freezing money.
PwC said there are “very limited” resources left in Beaufort and the cost of the insolvency will “in all likelihood be deducted from clients' recoveries”.
Customers who had money managed by Beaufort could be forced to wait months in the complicated case.
Nigel Rackham, one of the joint administrators from PwC, said: “We do forecast a substantial return to clients after costs, although this may take some time to implement and we do not see any returns commencing before mid-April as there are a number of challenges to overcome.
“In respect of the client assets there are a number of open positions and transactions which need to be resolved and concluded. This may impact the total once a final reconciliation takes place.”
The administrators have carried out at “preliminary meeting” with the Financial Services Compensation Scheme, which protects up to £50,000 in investments per person at the firm.