23 April 2009
The Council of Ministers will make one-off payments to 28 local investors who lost money following recklessly misleading advice by Alternate Insurance Services Limited.
This follows a Royal Court decision in the case of Jersey Financial Service Commission (“the Commission”) v Alternate Insurance Services Limited.
‘It is considered that exceptional action is warranted in light of the unique circumstances in this case,’ said Senator Alan MacLean, Minister for Economic Development.
The Council of Ministers gave particular regard to the fact that although Alternate was regulated by the Commission to conduct investment advice in Jersey, much of the misleading and reckless advice was given while the sector was not subject to the full force of appropriate regulation.
Before deciding to make these one-off payments, which will be capped in line with the UK’s Financial Services Compensation Scheme, all other possible avenues for recovery through the courts were exhausted by the Commission.
Those affected were all local Jersey residents and were not sophisticated investors. They invested in high risk products believing they were low risk because of recklessly misleading statements by Alternate. The Council of Ministers decided, as a last resort, to provide these investors with limited redress.
Senator Maclean said: ’This was an unprecedented case with exceptional circumstances, which we do not expect to see again. Given the uniqueness of this case, the Council of Ministers has decided to make one-off payments to the Alternate investors. I hope that these payments will go some way in helping to relieve the consequences that many of these people have suffered‘.
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Notes to Editors:
1. For further information, please contact Alan Maclean, Minister for Economic Development on: 01534 448886.
2. A one off ex gratia payment will be made to investors by the Economic Development Department in respect of losses incurred following recklessly misleading statements by the independent financial adviser Alternate Financial Services Ltd (“Alternate”) as verified by the judgement of the Royal Court. This case stands alone as a “one off” due to the following special features:
• The reckless and misleading advice that was given to these investors by Alternate was very severe and included statements which the judge found were “entirely false” and “grossly misleading”.
• The advice was given during the transitional period from no regulation to full regulation of the sector. Not all the investment advisers at Alternate had fully qualified at the time of the misleading advice – there will never again be a transitional period of this magnitude in this sector.
• All avenues for recovery against all possible sources have been fully pursued through all available reasonable avenues. The IFA, the investment advisers working for Alternate, and the insurers have all been pursued by the JFSC through the courts in an attempt to obtain recovery.
• Those affected were all local Jersey residents and were not sophisticated investors. They were sold high risk investments as low risk.
• There was a strong recommendation by the Judge for a scheme compensating these investors.
The payments will be made in accordance with that which would have been paid under the UK Financial Services Compensation Scheme. This means that there is a cap of £48,000 in the amount of compensation that each investor will receive. This cap involves the full repayment of any loss up to £30,000 and 90% of any further loss up to an additional £20,000. The imposition of a cap on the amount of compensation any one investor can receive is in accordance with international norms. This means that redress under such schemes is targeted at those who need it most.
3. As a result of this case, the Economic Development Department has commenced a review of investor protection. In the past, due to the costs involved, the Department has chosen not to have a standing scheme and to deal with cases on the facts of the case, as and when they arose. Now, the Department will look again at the cost benefit analysis of establishing a scheme. The findings and proposals will be published as soon as possible. If legislation is required, the Department will look to bring it to the States within 2 years at the latest.
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