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FCA cracks down on fledgling wealth firm with £1.5m shortfall

FCA cracks down on fledgling wealth firm with £1.5m shortfall

The Financial Conduct Authority (FCA) has clamped down on an investment firm after being alerted to a £1.5 million shortfall in its client monies and a £1.2 million shortfall in regulatory capital.

The FCA has ruled that London-based Hartmann Capital can no longer carry out regulated business, except settlement of certain transactions in non-derivative financial instruments, and it can no longer deal with client money and should terminate any derivative contract to which it is a party to.

In December 2013 the firm informed the regulator that although it should hold around £25 million of client money it had a £1.5 million shortfall and also had a £1.2 million shortfall for its regulatory capital.

The firm also told the regulator that if it was unable to pay its debts it proposed to use client money to fund payments.

At the time the firm took actions to ensure the situation did not worsen, including a voluntary cessation of new business.

In a supervisory notice dated 24 December 2013, the FCA said it had ‘serious concerns’ about the firm which had no reasonable short term prospect of making good its shortfall.

‘The risk of further loss to consumers because of Hartmann’s failings (including its failure to make good the client money shortfall and its proposal to use client money to fund further expenses of the firm) causes the authority to have serious concerns about Hartmann, such that the exercise of the authority’s own initiative power to impose [the bans] with immediate effect is an appropriate response to those concerns.’

‘In the FCA’s view there is no reasonable prospect of the firm being able to make good the client money shortfall and in addition there is a real risk that Hartmann may, whether or not in good faith, permit client money to be released from its client bank accounts or client transaction accounts- so resulting in a greater client money shortfall.’

In an announcement to its clients, the firm said that in December 2013 it had applied for a petition for the winding up of the company.

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