Clients facing £6m losses over Dunedin

FAILED wealth adviser Dunedin Independent has left creditors more than £400,000 out of pocket and clients facing losses of up to £6 million on mis-sold investments, new documents have revealed.

A report by Dunedin’s liquidators seen by Scotland on Sunday shows that the company racked up claims from 60 former clients who were hit by losses on property-based investment schemes.

Added to this, Dunedin’s insurers have refused to cover the mis-selling claims, and the liquidators have said that investors hoping to recoup their cash will have to contact the Financial Services Compensation Scheme (FSCS).

• Read the report in full

Blair Nimmo, head of restructuring for KPMG in Scotland who was appointed as the company’s liquidator in March, said that there “may be a small” payout to be made to the company’s creditors once the firm’s assets are sold.

He confirmed that there was a preferred bidder for the company’s assets but declined to reveal its identity.

It is understood the Financial Services Authority (FSA) is conducting an investigation into Dunedin’s collapse in July last year after former directors abandoned the company to establish Melville Independent.

Yuill Irvine, the former managing director of Dunedin, took 16 staff with him to the rival wealth manager in June as it emerged the company faced mounting liabilities over the mis-sold investment claims.

Following Irvine’s departure, the company’s Swiss owner, Helvetia Wealth, shut the Dunedin business after deciding that it “could not comply with its regulatory requirements”, the liquidators report said.

The closure came as a surprise to many as Helvetia had only owned the business, formerly the fourth largest independent financial adviser in Scotland, for 18 months after it spent £4m to acquire it from its founder Mark Emlick.

At the time of the collapse, Helvetia’s director, Herbert Flugel, attempted to put a brave face on the closure by claiming that Melville “operated autonomously” as part of its UK wealth business.

However, it emerged Helvetia was embroiled in a dispute with Irvine, with Helvetia claiming 80 per cent ownership of Melville.

Angry stakeholders who face losses of hundreds of thousands have threatened to take legal action and form a creditors action group to seek further redress against the company or its directors.

One client who lost money but asked not to be named, said: “I hope the authorities deal with him in the appropriate manner.”

Creditors claim that Melville is a “phoenix company”, which involves transferring assets to another legal entity.

In such cases, the FSA can take action where new companies do not ensure “adequate provision to deal with complaints and any resulting claims in relation to their former business”. The FSA declined to comment.

Nimmo’s report called for more information on the conduct of “directors or shadow directors” of the company previous to Dunedin’s collapse.

2009: Dunedin sold to Helvetia Wealth for £4m

June 2011: Dunedin director Yuill Irvine and 16 other staff joins start-up firm Melville Independent, although he is not listed as a director

July 2011: Dunedin ceases trading as investors complain of losses on property investments

February 2012: Dunedin in liquidation