Guernsey authorities order wind-up of Providence Global

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A Guernsey court on Monday ordered that Providence Global Ltd – the Guernsey-based, international affiliate of a Miami-based company that filed for bankruptcy protection in July, known as Providence Financial Investments – be compulsorily wound up.

The order followed an application made by Guernsey’s regulator, the Guernsey Financial Services Commission, according to a statement on the GFSC’s website. In addition, Philip Bowers, Andrew Isham and Alex Adam of Deloitte LLP were appointed as joint liquidators of Providence Global, the statement said.

Although Providence Global is not regulated by the GFSC, the regulator said it brought the application under relevant Guernsey laws following the 9 August appointment of Deloitte as administrators of two other Guernsey-based Providence entities: Providence Investment Funds PCC Ltd (an investment fund, structured as a protected cell company, or PCC), and Providence Investment Management International Ltd (manager of the fund).

Providence Global, which the GFSC also refers to as the Providence Parent Company, was an international business affiliated with but separate from the Miami-based Providence Financial Investments, sources familiar with the business said.

In addition to Providence Investment Funds and Providence Investment Management International, Providence Global’s businesses included a Brazilian factoring company, Providence Fomento Mercantil, Investimentos e Participações Ltda (Providence Fomento) into which the Providence fund had invested, the GFSC noted. Among its products were two mini-bonds, Providence Bonds plc and Providence Bonds II plc.

It is also understood that the two mini bonds, which were unregulated products 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, who had invested an estimated £8.15m.

These were said to be sold into the UK market via Independent Portfolio Managers Ltd, a London-based company authorised by the Financial Conduct Authority.

There are also said to be an undisclosed number of UK investors in the Guernsey fund in administration, Providence Investment Funds PCC, although this couldn’t immediately be confirmed.

In its statement on Monday, the GFSC said that it became evident to the Deloitte administrators, as they began to carry out their review into the two other Providence businesses, that “the Providence Parent Company [in Guernsey] was insolvent”.

“In addition, in order for the position of monies lent to Providence Fomento by the [Providence Investment Funds PCC] fund to be established, access to the records of Providence Fomento [was] required.

“The joint liquidators will proceed with the orderly winding up of the Providence Parent Company.”

Miami-based factoring biz investor

Yesterday’s action by Guernsey against Providence Global is the latest in a saga that quietly began in the US in June, in the state of Minnesota, when the American Securities & Exchange Commission took an initial action against Providence Financial Investments, Inc., a Miami-based company which invested client money in a Brazilian factoring business. A few weeks later, under continued investigation by the SEC, Providence Financial Investments filed for Chapter 7 bankruptcy in the US Southern District Court in Miami, amid press reports there that “hundreds” of US investors stood to lose “millions” as a result.

A US Chapter 7 bankruptcy provides for the liquidation of the company in question and for the distribution of the proceeds to its creditors.

On 9 August, as mentioned above,  the administrators were called in to take over two affiliated Guernsey businesses, the Providence Investment Funds PCC and its manager, Providence Investment Management International Ltd.

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 been a “part of the Providence Group” of Guernsey.

Most recently, as reported yesterday, the Financial Times on Saturday, citing an unidentified source, reported that an affiliate of the Miami company had been selling so-called “mini-bonds” into the UK market, via Independent Portfolio Managers,  and that the UK’s Financial Conduct Authority was “writing to the SEC for more information on [its] investigation into Providence Financial”.

An FCA press spokesperson told International Investment that the authority would not be able to comment on the matter.

Neither IPM directors Tony Curtis nor Martyn Ingram were available for comment, yesterday or today.

Global focus

It appears unclear at this point how many more, if any, Providence Financial operations — ailing or otherwise — have yet to emerge.

A report in the Miami Herald newspaper on 3 August noted that an “undated informational packet” showed Providence Financial as having at one point had 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 as of 13 June 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%”.

Note: This story was amended on 23 August at 22:35 to show that the Guernsey-based Providence Global Ltd, also referred to by the GFSC as “the Providence Parent Company”, was not a fully-owned subsidiary of the Miami company, Providence Financial Investments, but a separate, affiliated entity.

To see a more recent article about Providence, concerning the arrest of four individuals in Guernsey in May 2017, click here.