Background

A group comprising two FCA-regulated insurance brokers failed when the board identified that trust accounts containing client funds were in deficit. The group had insufficient funds to restore the client accounts; as a result, the board appointed two partners of FRP to act as joint administrators to the group and its subsidiaries.

Action

FRP launched a long-running investigation into the causes of the business failure, and the reasons why trust funds were in deficit. Our team discovered that as well as being in deficit (ie the clients were owed money), the trust funds had been co-mingled between the separate trust fund accounts and the group’s bank accounts.

This led to multiple applications to court for various orders, including how to agree clients’ claims, the process to distribute funds, and whether the cost of this work should be met by the insolvent estate or from the clients’ funds. The court ordered that the costs could be met from the trust funds, which then required a further application to court for a costs hearing.

Outcome

The client funds have now been distributed. The group is now in liquidation, and a substantial claim for negligence has been issued against a former adviser to the group.