Less than two weeks after the collapsed Guernsey-based and regulated Providence Investment Funds PCC and its manager, Providence Investment Management International Ltd, were revealed to be connected to a Miami-based company that had been forced by the US authorities to file for bankruptcy in July, a UK link has been reported as well.
In a story filed on its website yesterday, the Financial Times reported that an affiliate of the Miami company had been selling so-called “mini-bonds” into the UK market, via Independent Portfolio Managers Ltd, a London-based company authorised by the Financial Conduct Authority.
According to the FT, the FCA “is writing to the SEC [US Securities & Exchange Commission] for more information on the investigation into Providence Financial”, citing an unidentified source. An FCA press spokesperson said the authority would not be able to comment on the matter.
Neither IPM managing director Tony Curtis nor director Martyn Ingram was available for comment on Monday afternoon.
However, a source familiar with IPM said it was important to note that all of Providence Financial’s non-US businesses were administered by Guernsey-based Providence Global Ltd. It has not been put into administration, even though two of its Guernsey entities, Providence Investment Funds PCC and its manager, Providence Investment Management International Ltd, were, earlier this month, as reported.
Thus the mini-bonds in question, Providence Bonds plc and Providence Bonds II plc, which are wholly owned subsidiaries of Providence Global Ltd, are not in administration at the present time, the source, who requested anonymity, said.
Meetings on the matter are ongoing, the source added.
It’s understood that the two mini bond products, which were unregulated and sold to sophisticated investors, high-net-worth individuals and others in the non-retail investment market, hold the combined investments of around 800 UK individuals, which were said to total approximately £8.15m.
There are also understood to be an undisclosed number of UK investors in the Guernsey fund in administration, Providence Investment Funds PCC.
As reported, the Guernsey regulator placed the the Providence fund and its manager in administration after the directors of both companies resigned on 4 and 5 August. A Jersey link was revealed a few days later, when the Jersey Financial Services Commission issued a statement saying it was looking into the case of a regulated Jersey financial adviser called Lumiere Wealth, which was said to have been selling Providence Investment Funds PCC to Jersey residents – and which had in fact, it noted, been a “part of the Providence Group” of Guernsey.
It later emerged that the Guernsey Providence businesses were affiliated with a Miami-based company, known as Providence Financial Investments, which filed for Chapter 7 bankruptcy in the US on 28 July, following what were said to have been “actions by the US SEC to shut it down”.
A report in the Miami Herald newspaper on 3 August noted that SEC documents showed the company had estimated assets of no more than US$10m, and that an “undated informational packet” showed it as having at one point at least some “24 offices around the world, including Shanghai, Dubai, Istanbul, London and Sao Paulo”.
According to an SEC filing which details the US regulator’s actions in the matter and why they were taken, Providence Financial and Providence Fund raised more than US$64m from more than 400 investors throughout the United States “through the unregistered sale of promissory notes that pay annual returns generally ranging from 12% to 13%”.
But “at best” the two entities spent less than 68% of their of the investors’ money on the Brazilian factoring business that they had been told it would be used for, “and both companies have been unable to account for how they spent the remaining investor proceeds”.
Meanwhile, “uses of investor funds that were not disclosed to investors included the payment of 6% annual commissions to unregistered brokers for selling the promissory notes as well as the payment of millions of dollars to Providence Financial and Providence Fund insiders”, the SEC document says.