Harlequin Property update: SFO investigates & SIPP providers admit to holding Harlequin investments

The last couple of months have been worrying ones for Harlequin Property investors, first came an alert to financial advisers by the FSA, then rumours of an investigation by the Serious Fraud Office (SFO), which appear to be true and it now seems that income payments to some investors have stopped.

Since we last wrote about Harlequin Property on 4th March, which you can still read by clicking here, we’ve been contacted by a number of investors into the scheme. Some were simply worried about the future of their investment, whilst others have seen their income payments stop.

Worryingly, a number of people who contacted us have borrowed money, including by taking out a mortgage secured on their home, to invest in the scheme. Where income payments to these investors have stopped, they will be left to meet the mortgage and loan repayments through other sources of income, or by using their capital.

The current situation is fluid, with new developments almost every day, so we’ve pulled together the latest news for Harlequin Property investors.

Out of court settlement

Following a move to freeze the assets of Harlequin Property, a small number of investors have reached an out of court settlement with the firm, which has been reported as being “substantial”.

Representing a number of investors law firm Regulatory Legal made an application to Birmingham High Court to freeze the assets of Harlequin Property. However, after the out of court settlement, which is unfortunately confidential, the Regulatory Legal has confirmed that the application will not proceed.

In a statement, Regulatory Legal said: “Within the substantive proceedings an application for a freezing order was made. The freezing order application was listed on 7th March.”

“The judge postponed the hearing of the application until 14th March. The claimants asked for an interim order for seven days until the hearing on 14 March. This interim application was not granted by the court.”

“The parties reached an agreement on 8th March. The terms of the settlement are confidential. Procedurally, the claimants’ lawyers will appear before the court on the 14th March to obtain an order from the court finalising proceedings.”

Harlequin Property also issued a statement, which said: “On Thursday 7 March 2013, Regulatory Legal Solicitors, acting for six purchasers of properties at Buccament Bay Resort, applied for a freezing order against Harlequin Property and Buccament Bay Resort Limited, but the court refused their application.

“This application followed days of media speculation unfairly inferring that Harlequin Property and Buccament Bay Resort would be forced to stop trading.”

“Harlequin is pleased to say that the court refused to grant the application after a fully-contested hearing.”

“Harlequin denies any wrongdoing and looks forward to clearing its name in relation to the other allegations that are currently being unfairly referred to in the press.”

Serious Fraud Office investigation into Harlequin Property

In a statement on their website the Serious Fraud Office (SFO) has confirmed that, in conjunction with Essex police, it is “looking into complaints in relation to the Harlequin group”.

The SFO would like to hear from people who have invested in Harlequin schemes, specifically:

• Buccament Bay in St Vincent & the Grenadines
• Merricks in Barbados
• Marquis Estate in St Lucia
• The Hideaway in the Dominican Republic
• Las Canas in the Dominican Republic
• Two Rivers in the Dominican Republic
• Garapua Beach Resort in Brazil

The SFO has posted an online questionnaire for investors to complete, asking amongst other questions, who introduced the investor to Harlequin and whether investors would be willing to appear as a witness in any subsequent prosecution.

Click here to read the full SFO statement or click here to complete the online questionnaire.

Warning over SIPP lending limits

Meanwhile law firm, Regulatory Legal, who are at the forefront of investigations into Harlequin Property, has warned that the investments could breach SIPP rules.

A Self-Invested Personal Pension, or SIPP for short, can borrow up to 50% of its assets. However, IFAoline has reported that following a review by Regulatory Legal into a number of Harlequin investments, made via SIPPs, there is concern that this lending limit could have been breached.

A spokesperson for Regulatory Legal said, “”The Harlequin model requires 70% gearing to make it work for most investors. The limits on lending within a SIPP restricts what can be borrowed for completion. The gap between the two means in most cases that completion would be impossible to achieve.”

SIPP providers holding Harlequin Property

The FSA recently asked SIPP providers to confirm the extent of their exposure to Harlequin Property.

Some SIPP providers, including Suffolk Life, LV=, Talbot & Muir and Liberty were quick to confirm via Twitter that they held no investments with Harlequin. However, it was reported this week by Financial Adviser magazine that other SIPP providers, including Rowanmoor, Alltrust, Hornbuckle Mitchell and the Lifetime SIPP have accepted Harlequin investments in the past, although many have no stopped doing so.

We caught up with three leading SIPP providers. Firstly, Oliver Bowler, Business Development Consultant for Talbot & Muir, said: “We recognised some significant potential flaws with the Harlequin investments very early on and thanks to our robust due diligence processes, these were identified and the investments disallowed within our schemes.”

Oliver continued: “It is important that providers balance the desire for increased sales with the security of their investors as not only could there be potential taxation issues but reputations can soon be destroyed as well.”

Nigel Bennett of InvestAcc, takes a similar view: “We (InvestAcc) have no exposure to Harlequin, as in our view it immediately fell down on the borrowing requirements which exceeded the permitted maximum. It didn’t even make it to the full due diligence stage”.

Finally, David Fox of Dentons, said: “We have a very robust due diligence process for all non regulated investments and as a result of this strict process we have a company policy not to allow any off plan hotel investments. I can therefore confirm that we do not have any exposure to Harlequin Properties.”

Are you a Harlequin Property investor?

If you are a Harlequin Property investor you will naturally be concerned about the recent developments. The investors we have spoken to have had mixed emotions, however all have wanted to take some form of action.

We would recommend that Harlequin investors continue to monitor the situation whilst completing the Serious Fraud Office questionnaire, which can be found by clicking here and also visit the website set up by Regulatory Legal: www.harlequininvestorgroup.co.uk/ for more news.

You can also contact our team of Independent Financial Advisers on 0115 933 8433, alternatively enquire online or email info@investmentsense.co.uk