The Financial Services Compensation Scheme has launched an investigation into City-based investment firm Pello Capital (FRN 449720) after FCA concerns about fraud and money laundering.
The compensation body said it has also opened the door to claims against the company, but has no claims data yet and no indication if the firm will eventually be declared in default.
The firm has been in liquidation since 22 December.
In November last year the FCA expressed concerns about whether the firm was solvent or active.
The FCA published a supervisory notice about the firm late last year which imposed a raft of restrictions on the business, including suspending the firm’s Part 4A permissions to carry out regulatory business except to facilitate the transfer of clients to other appropriate, authorised firms.
The FCA said it had numerous concerns about the company including on governance, money laundering and non-payment of bills to the FCA, including an invoice for £165,600 for an FCA review.
The FCA said in its notice: “The Authority has identified serious concerns relating to Pello.”
Pello closed over 1200 client accounts after the FCA raised concerns about whether the company had carried out sufficient regulatory checks on the clients to know who they were.
The FCA added: “A section 166 review identified material and wide-ranging deficiencies with Pello’s governance arrangements and risk management controls. This led to a significant number of recommendations to be addressed as high and medium priority.
“Pello has failed to demonstrate significant progress relating to the section 166 remedial work. It is currently engaging specialist support and seeking a recapitalisation to complete the section 166 remedial work. The deficiencies give rise to the risk that Pello may be facilitating poor market conduct and/or money laundering and other financial crime.
“In particular, Pello’s controls are not robust enough to identify high-risk clients, adequately monitor their activities and prevent its business being used to potentially facilitate market abuse and investment fraud.”
Pello was authorised from 2007 as an IFPRU 50K Limited Licence investment firm. It was allowed to conduct a range of investment-related regulated activities including advising on, arranging, dealing in (as principal and agent) and managing investments. Pello was allowed to control but not hold client money and assets.