Before : |
J. A. Clyde-Smith, Esq., and Jurats Olsen and Sparrow |
IN THE MATTER OF THE REPRESENTATION OF LUMIERE WEALTH LIMITED
AND IN THE MATTER OF ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991, AS AMENDED
Advocate E. Moran for the Representor.
judgment
the commissioner:
1. The Representor, Lumiere Wealth Limited ("LWL"), is an independent wealth manager regulated by the Jersey Financial Services Commission ("Jersey Commission") for investment and general insurance mediation business.
2. LWL is owned 65% by Providence Global Limited ("PGL") and 35% by Mr Christopher Byrne.
3. PGL is a Guernsey registered company and the holding company of a number of other companies and structures collectively known as the "Providence Group". Included in that Group are:-
(i) a Guernsey regulated fund manager called Providence Investment Management International Limited ("PIMIL");
(ii) a Guernsey regulated investment fund called Providence Investment Funds PCC Limited ("PIF");
(iii) an unregulated Guernsey fund called Providence Investments PCC Limited ("PIP") ostensibly available to "friends & family" of Providence employees; and
(iv) two factoring companies in Brazil.
4. Funds invested in PIF and PIP were ostensibly lent to the factoring businesses in Brazil.
5. PIF was one of the products recommended by the financial advisers at LWL to the clients of LWL. In June 2016 approximately £14 million of client monies were invested in PIF. Employees of LWL also invested substantial sums into PIP.
6. One of the ultimate beneficial owners of the Providence Group is Mr Antonio Buzanelli. There are also Providence companies in the US (and elsewhere) that are owned in part by Mr Buzanelli. Funds invested in the US companies (approximately US$64 million) were supposedly lent to the same two factoring businesses in Brazil.
7. It appears that only a small proportion of the monies invested in the Guernsey funds (PIF and PIP) and the US companies were in fact invested into the factoring businesses in Brazil. The rest of the funds were diverted for use elsewhere in the Providence Group and other companies owned by Mr Buzanelli. As a consequence the following action has been taken in the US and Guernsey:-
(i) in the US the Securities and Economic Commission has prevented further investment into the US companies, frozen the assets of the companies and is investigating the companies and Mr Buzanelli for an alleged scheme to defraud investors; and
(ii) in Guernsey payments in and out of PIF and PIP have been suspended, PGL has been placed into insolvent liquidation and administration managers (Deloitte) have been appointed over PIMIL, PIP and PIF.
8. The following action has been taken by the Jersey Commission in relation to LWL on 10th June, 2016:-
(i) LWL was directed not to offer investment advice in relation to PIF; and
(ii) an investigation was commenced into various potential regulatory failings including the suitability of investment advice provided by LWL to its clients.
9. In light of the above and following consultation with the Jersey Commission the clients of LWL are being moved to alternative providers. Some clients have already transferred. The transfer of the remaining clients is imminent.
10. LWL is currently solvent. As at 26th September, 2016, the cash flow position of the company was £282,407. About 40 complaints have been made by clients in relation to investments totalling about £5 million. In addition, two clients have commenced proceedings in the Royal Court claiming £1.2 million in compensation. LWL has £5 million of professional indemnity insurance. LWL will become insolvent if some of the claims are admitted without recourse to full insurance cover.
11. For the reasons set out above the directors of LWL believe that it would be just and equitable and in the public interest for the company to be wound-up under the supervision of the Royal Court. The other alternatives are for the company to be wound up when it becomes insolvent by the Viscount or via a creditors winding up. The route of declaring the company en désastre is likely to be more expensive as the Viscount is likely to appoint insolvency practitioners as well as charging her own fees. A creditors winding-up is possible, but will not involve any Court supervision. The preference of the Jersey Commission is for a just and equitable winding-up under Article 155 as set out in its letter of 22nd September, 2016.
12. The circumstances in which the Court will exercise the just and equitable jurisdiction are summarised in Representation of Maltese Holdings and Zollinger Investments [2012] JRC 239. It will be appropriate to exercise the jurisdiction where there is:-
(i) a need to investigate the affairs of the company;
(ii) a need to protect investors; and
(iii) it is in the best interests of the stakeholders for the process to be overseen by a liquidator who is directly accountable to the Court.
13. Deloittes, in their proposal, have considered the issue of possible conflict arising between their position as joint liquidators of LWL and as administrators and/or joint liquidators of PIMIL, PIP and PIF. Their extensive prior involvement in this matter and detailed knowledge acquired provide considerable benefit to the investors and we accept their submissions that the interests of LWL and PIF are aligned. They will however continuously monitor the position should a conflict arise and report it to the Court.
14. The criteria in Representation of Maltese Holdings and Zollinger Investments is met and we therefore grant the application and make the orders sought subject to a number of small amendments.
15. The Court is not prepared to order that the costs of the Joint Liquidators prior to their appointment should be paid out of the assets of LWL save and to the extent that they or their firm may have had a prior right thereto.
Authorities
Representation of Maltese Holdings and Zollinger Investments [2012] JRC 239.