Calls to tighten regulation of financial advisers have been made as hundreds of north-east investors face losing up to £9million of their life savings due to a potential fraud.
Savers who had each handed tens to hundreds of thousands of pounds to the directors of Midas Financial Solutions (Scotland) are angry as police continue a criminal probe into an unregulated deposit scheme operated by the Aberdeen-based firm.
The Financial Conduct authority (FCA) has told investors they will not be able to claim compensation on their losses, because although the Midas advisers were registered with the watchdog as late as August of this year, the scheme they had been running for years was never regulated by the body.
A financial law expert told a Sunday newspaper that such unregulated schemes were “a menace and a plague” and the FCA should tighten rules to protect savers.
Paul Crutchley, a solicitor with law firm Regulatory Legal, said:
“Such unregulated investment schemes, sometimes promoted by regulated companies, are a menace and a plague. We need greater scrutiny of this area to prevent yet more investors falling victim to financial sharks.”
Alex Lucas, who told the Press & Journal faces losing £80,000 due to the Midas deposit scheme, believes that the regulator should be stepping in to support other victims.
The formerly Aberdeen-based oil and gas engineer, who now lives abroad, said: “It is the responsibility of the FCA to regulate against unregulated practice and protect the consumer. Yet when they discover that consumers are affected by unregulated practice, their own compensation scheme does not insure against unregulated practice. That seems like an oxymoron to me.”
It is thought a number of investors are currently considering taking expensive legal action in hopes of recouping their money from Midas.
Police have told the investors they can expect little back from their deposits.
Police Scotland launched a “large-scale” investigation into an alleged fraudulent scheme run by Midas Financial in October. Police have confirmed up to 180 savers may have lost “millions” in the scheme.
A spokesman for the FCA said the regulator could not comment while the police investigation into Midas was ongoing.
A spokeswoman for Police Scotland said:
“We are still investigating a potential complex, large scale fraud and it will take some considerable time yet. We are keeping investors up to date as best we can, and we are dealing with quite a few calls and emails on a daily basis.”