Towry Law pays $400m to settle case with SFC

PUBLISHED : Wednesday, 03 May, 2006, 12:00am
UPDATED : Wednesday, 03 May, 2006, 12:00am

The Securities and Futures Commission has reached a record high settlement of $400 million with Towry Law (Asia) Hong Kong, now renamed as UKFP (Asia) HK, over the misselling of hedge fund products to clients.

The settlement means the 2,300 investors who bought three fund products from its financial advisers will get back 60 per cent to 80 per cent of their investment, to be paid by the firm's London-listed parent Henderson Group.

In return, the firm has not had to admit liability and the commission has limited its disciplinary action by issuing only a severe reprimand.

The $400 million settlement comes on top of a $256 million settlement in August 2004 when Towry Law agreed to ex gratia payments equal to 90 per cent of the capital invested in Global Opportunities Trading and 80 per cent of that invested in Global Diversified Trading to the 1,000 clients who remained in the funds when trading was suspended in September 2002.

The settlement marks the end of a five-year investigation on behalf of thousands of clients who complained about misselling of Towry Law products.

The commission found that Towry Law failed to perform due diligence into the products before selling them to clients, that there was inadequate disclosure to investors, and that the funds carried a high element of risk for clients.

'The settlement is the conclusion of the commission's action against Towry Law,' said Alan Linning (below), an executive director of enforcement at the commission.

'The SFC considers the settlement is in the public interest. If the SFC had revoked Towry Law's licence, it would not have served investors as the company had suspended its business in Hong Kong last year.

'With this settlement, investors have the opportunity to get their money back.'

Under the settlement, the 700 investors who bought Circus Capital Protected Growth Fund Series 1 (PGF1) and the 550 who purchased Circus Capital Protected Growth Fund Series 2 (PGF2) can claim back 80 per cent of their investment, provided they had bought the products through Towry Law and remained in the funds up until yesterday.

By accepting the payment, the investors waive their right to launch legal action against the company.

The 1,066 investors who bought geared products from the fund could claim back 60 per cent on their investment based on the same conditions.