Sorting Fact From Fiction

October 2011

The internet is a wonderful invention and one, on balance, we would all rather have than not. However, as we all know, with it comes the proverbial ‘baggage’.  Therefore, please find below some additional information which hopefully you will find useful, and which we trust will bring about a bit of balance to this ‘baggage’.

Integrity Financial Solutions Ltd

Iain Stamp was the Chief Executive Officer and founder of Integrity Financial Solutions Ltd (IFS), a subsidiary of UK Integrity Group Ltd.  This company was originally set up in 1998 as an authorized Independent Financial Adviser (IFA) firm.  Its authorization also included arranging financial products for clients as well as advising on them and promoting Geared Traded Endowment Policy (TEP) Portfolios to IFAs.  Following a review of the corporate strategy, the IFA part of the firm was closed in June 2007 (it was no longer a focus for the business), and during 2009, the group decided to concentrate on its core entrepreneurial skills – developing innovative, non-mainstream, non-correlated products, partnering with specialist counterparties where required.  Since no regulated activities were to be undertaken in the UK, the Financial Services Authority (FSA) regulation was no longer required, and on the advice of its auditors, in October 2009, IFS was placed into Voluntary Liquidation.

Integrity Financial Solutions Ltd – TEP Maximisers

In January 2006, the FSA commenced an investigation in Geared TEPs.  The FSA viewed these investments as high risk, relying upon an expert that gave evidence in a Guernsey case relating to Geared TEP promotions (this case was not related to IFS); the expert said that geared TEPs were “high risk”.  The FSA then wrote to all IFAs that promoted the IFS TEP plans and warned them that they may have mis-sold the investment on grounds of risk category.  They also requested IFS write to all its own advised Geared TEP clients who invested (circa 59 clients).  

IFS had a robust argument with the FSA defending its position and was hopeful of taking its case to the Regulatory Decisions Committee (RDC) to seek an independent review of the investigation.  We believed that there was unfair treatment by the FSA in respect of this case (all network firms that did the same business have to date been excluded from the same enforcement action).  Despite the firm being in liquidation, the liquidator initially agreed that we could continue to argue with the FSA over the TEP matter.  However, at the beginning of 2010, the FSA contacted the liquidator and threatened to fine IFS whilst in liquidation (without any RDC hearing) or to publically censure the firm, with no fine.  We obtained a legal opinion advising the liquidator to resist the fine and continue to allow the case to be heard before the RDC. 

On 12 May 2010, more than 6 months after IFS was liquidated, despite our requests and a legal opinion, the Liquidator decided to accept a public censure on IFS, with no fine, by the FSA in respect of (Geared) Traded Endowment Policy (TEP) marketing literature and client suitability.

It is important to state that there was NO fine, ban or enforcement action taken against Iain Stamp as CEO, or against any authorized individuals or Directors of IFS and the FSA censure was unchallenged.

Media Articles

As a direct result of this FSA censure, some articles (the majority posted by a certain online media aimed specifically at IFAs) have been written.  These contain factual inaccuracies as well as a very one-sided view. The articles do not address the issues, nor do they understand the details; they are examples of mediocre journalism, preferring to grab headlines rather than understand the facts.  We made several attempts and invitations to meet with this particular publication to enable them to gain a proper and full understanding, they declined to meet. Regrettably, these articles also provided a platform for a number of vicious and sometimes deeply personal defamatory blogs, largely driven by a few ‘personally motivated’ individuals. 

Following the publication of false allegations concerning Iain personally and the companies, a Statement in Open Court was read in the Royal Courts of Justice in London, on 29 July 2010. The defendant, business consultant David Cottrell, accepted that there was no foundation for the allegations published and, as part of a confidential settlement, agreed to the reading in which he publically apologised for the damage caused.  Addleshaw Goddard LLP was the solicitor firm successfully defending Iain’s name and the companies.  A copy of the Solicitor’s press release is available upon request.

In addition, following the censure of IFS, further press articles (again with the same media) have been published regarding the performance of the TEP portfolios that IFS set up (650+ portfolios were set up by IFS, 600 of these clients were given advice by other IFA firms). 

• Integrity Reviews Ltd currently reviews and administers £54.5m of these TEP portfolios, designed to mature between 2020 and 2025. 
• Investors opened a loan account with predominantly either Bank of Scotland or Newcastle Building Society and, to date have received a total of £21.7m in tax free income withdrawals.
• There have been £2.2m in maturities credited to the loan accounts. 
• Furthermore, Integrity Reviews Ltd reports that TEPs are recovering from the poor market conditions with the portfolios seeing an average increase this year of 8.83% net of premiums paid (based on portfolios reviewed Nov 09 compared to the same portfolios reviewed Nov 10). For example, analysis of the portfolios under management show that the average Standard Life policy reduced by 6.77% between the 2008-2009 valuation (during the peak of the economic crisis) and has risen by 6.96% between the 2009 and 2010 valuation, thereby compensating for the negative returns incurred during the 2008-2009 period.
• Additionally, the Money Management – With Profits Survey dated April 2011 (which details the Annual Yields over the last 12 years for 10 and 25 year term With Profit policies) provides a valuable and independent indication of life company performance over the period. This analysis supports the long term positive returns on With Profit policies, surpassing the performance of other funds during the same timeframe.
• Integrity Reviews remains confident that the prospect for higher returns experienced for decades will continue, subject to the continuation of the recovery of the underlying value of assets in With Profit funds.

Managed Currency Margin Accounts

UK Integrity Group Ltd (Integrity) designed a managed currency trading method, which was managed by an FSA Authorized manager, Independent Portfolio Managers (IPM), and investors, advised by IFAs, opened individual managed margin accounts with London Capital Group Ltd (LCG) from April 2009.

• Following a series of accounting errors at LCG, the Managed Accounts were suspended by LCG on 2^nd December 2009, whilst they investigated the cause. LCG subsequently identified that they had not deducted commissions or converted trades back to sterling in accordance with expected procedures.  In December 2009 LCG requested that IPM and Integrity indemnify them against the potential for an FSA fine and or account holder complaints; however neither IPM nor Integrity could agree to this request.
• In January 2010 LCG terminated the client accounts and sent the account balances back to the account holders. The termination of the accounts was not as a result of any wrong doing by either Integrity or IPM. Solicitor Alasdair Sampson is currently representing a group of IFAs for around 140 individual investors against LCG. The clients are collectively complaining to the Financial Ombudsman Service with a view to compensation as a result of consequential damages of the LCG’s errors – the initial complaint has been upheld against LCG by FOS, although this is currently being appealed against by LCG.  The remaining account holders are expected to submit complaints to the Financial Ombudsman against LCG pending the outcome of the first cases.
• “The product” did not lose more than 60% and was not “a fund” as also incorrectly reported in publications. No fund ever traded.  Returns achieved by individual margin account holders varied; some clients experienced losses and some profits. The LCG errors resulted in over trading and magnified losses for the majority of account holders.
• The Financial Services Compensation Scheme received 26 complaints against IFS – none of these were upheld.
• In April 2010, Alpari (UK) Ltd was appointed as the new currency Broker to supply managed margin accounts for a similar range of products.  Alpari is fully aware of the termination of the LCG accounts and IPM has been appointed to manage these Alpari accounts.

Highly Regulated Product Counterparts

All our companies – UK Innovative Financial Designs Ltd (UKIFD), UK Innovative TI Ltd (UKITI) and Life Settlement Consulting Ltd (LSC – formerly UK Integrity Group Ltd) have appointed a full range of highly regulated counterparties including Investment Managers, Administrators, Custodians, Auditors, Actuaries, Lawyers, prime brokers and other specialists to bring absolute return investment products and authorized investment funds to the market.  All our counterparts are fully aware of the press, the FSA censure and the LCG situation, and, as you would expect, they have all completed their own detailed due diligence on our companies.  We work with entities such as Wells Fargo Bank, KPMG, Citibank International PLC, Grant Thornton UK LLP and HSBC Bank.

The Authorized Funds 

• The Strategic Life Settlement Fund Plc (SLSF) – Qualifying Investor Fund, was authorized in April 2010.  This fund is a PLC authorized by the Central Bank of Ireland and listed on the Irish Stock Exchange.  It details Iain as a Director, and the FSA censure on the previous firm within the Prospectus.
• The HC I Life Settlement Fund was authorized on 28 February 2011 by the Financial Services Authority, detailing UK Innovative Financial Designs Ltd in the Fund’s Prospectus as its Distributor.
• The Strategic LS Access (I) Fund Plc) – Qualifying Investor Fund, authorized in March 2011. This fund is a PLC authorized by the Central Bank of Ireland and listed on the Irish Stock Exchange.  It details Iain as a Director, and the FSA censure on the previous firm within the Prospectus.
• The Strategic Managed Currency Fund was authorized 23 August 2011 by the Bermuda Monetary Authority, detailing UK Innovative TI Ltd in the Fund’s Prospectus as adviser to the Investment Manager.

The above funds’ history, which clearly shows that these funds’ have been, and continue to be authorised, demonstrates that the relevant Regulators will have completed due diligence on Iain Stamp, Katrina Stamp and the companies, in order to permit these Funds to continue.

We hope the above information gives you a greater understanding of the facts; however should you require any further clarification or more detailed information please do not hesitate to contact either Iain or Katrina Stamp directly on any of the details below.

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