Philips Trust: FCA got 'Ponzi scheme' warning on firm at heart of £138m building society scandal - 18 months before collapse

Philips Trust, formed in December 2017, had taken over property trusts and life savings investments belonging to hundreds of building society customers. It was an unregulated firm but court records published two years ago have revealed the FCA had been looking into issues with the company since 2018.

In autumn 2020, Mr Anderson told the FCA he was concerned about the security of £80,000 invested by one couple and what he believed were unrealistic investment returns being pledged to another.

His email added: “Unfortunately my guess is that there are hundreds of elderly savers in a similar position and this could run into millions of pounds. I so far have similar information on about seven other customers that I could share but that would be just the tip of the iceberg I believe.

“I understand things can take time but this definitely needs investigating as I can only believe it is in effect a Ponzi scheme.”

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The FCA launched a review of the company and wrote to him in January 2022 to say the work had been completed. It described the information he had provided as “insightful” but did not say whether it had made any determination on the “Ponzi scheme” allegation.

The FCA told Mr Anderson it had taken action by providing “guidance to the firm as to how they should conduct certain aspects of their business”. The FCA also said it had spoken to the firm and also sought proof of compliance with its requirements.

But just three months later PTC collapsed into administration.

When the company went into administration, a court statement was given by director Kay Collins. She said that when she took control of the company in February 2019 she had believed it to have been operating “properly and profitably for a number of years”. But she said that in late 2020 accountants advised there had been “co-mingling, pooling and mistreatment of client monies”.

Her statement also revealed that three properties had been sold for a collective £800,000 with the money used to repay other parties as opposed to going back to its rightful owners. Ms Collins said in her statement that she felt she had “no choice” but to do so in an attempt to stave off the company’s illiquidity issues.

The three properties were subsequently confirmed to include a house in Dewsbury which had belonged to a woman called Mary Ledgard. It was sold for £180,000 in November 2021 after her death but her sons never received the money they were due from PTC before it collapsed.

David Compston, a family friend of the Ledgards who has been assisting with attempts to recover their money through the administration process, said he had also contacted the FCA with concerns about Philips Trust in February 2022 but had heard nothing back.

In regard to the regulator’s handling of Mr Anderson’s complaint, Mr Compston said: “If the FCA had done their job and responded to this, then the Ledgard brothers and others would not be suffering like this.”

PTC had also placed £44m worth of savings with four “investment management” companies. Administrator Kroll has been seeking to recover money owed as bonds mature but as of last month, £14.6m of £15.7m that is owed is currently in default.

In a court case involving one of the firms given money, a lawyer for Kroll said money had been put towards providing “genuine albeit foolhardy” high risk loans to small businesses which have since gone bust.

An FCA spokesperson said the regulator has considered all information it has received about Philips Trust “and will continue to do so”.

Whistleblower: ‘I’m absolutely horrified – the FCA gave them the green light’

A whistleblower who worked for the firm at the heart of a £138m building society scandal believes regulators wrongly “100 per cent dismissed” his concerns.

Nick Anderson, a financial adviser from Hartlepool, worked as a salesperson on commission for Philips Trust Corporation but became concerned about some of the company’s activities and made a whistleblowing complaint to the FCA.

He has now decided to go public after reading in The Yorkshire Post about how the scandal has developed.

PTC had recently taken over clients from the Family Trust Corporation and Will Writing Company. The two firms, part of the Estate Planning Group, had worked inside the branches of several major building societies encouraging customers to sign up to family trusts and saving investments schemes.

Mr Anderson said his role was mainly to do with selling additional financial products to those customers such as lasting powers of attorney.

He said his concerns began when he was asked by PTC to pick up a cheque that a customer wanted to invest. He said the cheque was for a five-figure sum and he was told that it should be made payable to Philips Trust.

“Because I’ve got experience in financial services, I thought that is not right - because it should either be to the authorised investment company you are dealing with or a Philips Trust client account. With the latter if the company goes bust, that money is protected.

“They were just telling people to put their life savings into their bank account. I thought that was wrong.”

He was then shown a statement by the man about the potential returns he could receive on investing his life savings.

Mr Anderson said the figures looked “unrealistic” and then refused to take the cheque. “I said I can’t take this cheque off you because I don’t think this is quite right and I wouldn’t invest it in this manner.”

He left the firm shortly after contacting the FCA and was disappointed when the regulator responded over a year later in January 2022 to say they had reviewed the case, spoken to the firm and issued ‘guidance’.

He has been shocked to learn about what has transpired subsequently.

“I’m absolutely horrified now I know people have lost their houses. The FCA knew about this company and did nothing. There should have been a criminal investigation. The FCA should be refunding people’s money in my opinion.

“If they had investigated what was going on properly, they would have closed them down straight away. The FCA basically gave them the green light.”

An FCA spokesperson said: “The collapse of Philips Trust Corporation has led to significant distress for those who lost money. We have been looking at a number of building societies who referred customers to the Estate Planning Group, including the Will Writing Company and the Family Trust Corporation, whose assets were bought by Philips Trust.

“Philips Trust wasn’t regulated by the FCA. However, we have considered all the information we received about it, and will continue to do so, to better understand if it was properly using the legal exemption taking trusts out of FCA regulation.”