Harlequin Property has come under the scrutiny of financial regulators after allegedly failing to meet commitments to investors for the second month in a row.
The company is based in the UK and sells property in the Caribbean, but is not regulated by the Financial Services Authority (FSA).
Investors buy the properties off-plan and Harlequin pays their interest on borrowings until the properties are completed.
The scheme has proved popular as a self invested personal pension (SIPP) product, but now the FSA has written to every financial adviser in the country asking for details of any clients who may have invested in Harlequin.
The FSA says the move is part of a remit to supervise the work of financial advisers, and in a statement explained a demand for more information may follow the initial request.
Letter to advisors
In January, the FSA reminded advisors of their responsibilities to clients investing in Harlequin, and highlighted that the firm was not regulated by the FSA.
When a financial service or product is unregulated, the investor has no recourse for compensation should the investment fail.
The FSA’s warning in January urged financial advisors to consider how building work was progressing in the Caribbean and how the company would invest client funds during the construction phase.
The warning was made alongside another to advisors giving notice of what the FSA termed unsuitable advice to clients about transferring assets into unregulated collective investment schemes (UCIS) held in SIPPS.
Now, some investors are highlighting an issue with the non-payment of the expected interest on their Harlequin investment.
The FSA believes thousands of investors have poured money into projects run by Essex-based Harlequin to build luxury villas in the Caribbean.
Previously, Harlequin said that the non-payment of interest was down to a one-off banking error, but many more investors have contacted the FSA about the company.
Harlequin has declined to comment on the latest developments, but previously the firm’s managing director, David Ames denied misleading investors. He explained his company was duped by contractors, that legal action was in progress and that all projects would be completed.
One national newspaper has alleged that the Serious Fraud Office is investigating Harlequin amid fears of mis-selling investments, while some investors have hinted that a legal challenge is under way as well.