The UK Financial Services Compensation Scheme (FSCS) has provided an update to the clients of Dolfin Financial (UK) Ltd.

Dolfin is an independent wealth management firm. It provides investment management, investment advisory, execution-only and custody services.

On 12 March 2021, the Financial Conduct Authority (FCA) imposed restrictions on Dolfin. This meant it could not conduct its regulated activities in the normal way. Dolfin’s Board of Directors began an orderly wind-down of the company.

On 30 June 2021, it was placed in Special Administration following a court application.

FSCS understands that the joint special administrators (JSAs) intend to ask the Court to approve the Distribution Plan in the near future. This will enable customers’ Custody Assets to be returned.

FSCS will not be open to customer claims against Dolfin until the Court has approved the Distribution Plan.

Dolfin was an independent wealth management firm offering investment management, advisory, execution-only, and custody services. Dolfin also provided execution-only and custody services to overseas investors under the UK’s Tier 1 investment visa programme (Tier 1 Visa Scheme).

Regarding the Tier 1 Visa Scheme, investments were made in bonds from several UK plc, including Artek Group plc (now called Finerbase Limited), Altafinch UK plc, Data Grid Solutions plc, and Camsem Investment plc.

On March 12, 2021, the Financial Conduct Authority issued a First Supervisory Notice. This prevented Dolfin from conducting regulated activities. Dolfin entered special administration on June 30, 2021 with the JSAs appointed on that date.

In July 2021, many of Dolfin’s customers were transferred to Britannia Financial Group Ltd (Britannia). This left a pool of customers, mainly those involved with the Tier 1 Visa Scheme, who did not transfer.

The JSAs plan to submit a Distribution Plan to the Court for approval to return customers’ Custody Assets. Once approved, the JSAs will be able to meet the costs of returning customer Custody Assets (Custody Asset Transfer Costs). This will be done either by direct payment from the client or by sale and deduction from the Custody Assets themselves.

The JSAs are also in the process of declaring, and paying, a distribution of Client Money balances at 30 June 2021 and Corporate Action Income received after 30 June 2021. The costs associated with distributing Client Money from the Client Money Pool (Client Money Transfer Costs) will be deducted from customers’ Client Money claims. The return of Client Money is not subject to the Distribution Plan.

Customers will be aware that the JSAs are in the process of contacting customers to make arrangements for the interim distribution of Client Money.

FSCS may be able to compensate Dolfin’s customers for the shortfalls that customers incur because of Custody Asset Transfer Costs and Client Money Transfer Costs, up to our compensation limit (see point 1 below).

FSCS will not compensate Dolfin’s customers for the shortfall that customers incur in relation to corporate action income returned to them.

FSCS has set out the different categories of cost that that customers are likely to face under the Distribution Plan.

It’s important to note the following:

• Whether FSCS can pay compensation for a customer’s claim under its rules will be considered by FSCS on a claim-by-claim basis, and at the point the individual claim is submitted to FSCS. Please note that any compensation FSCS pays in respect of Dolfin is subject to FSCS’s compensation limit of up to £85,000 per eligible person. This £85,000 limit applies to the total value of all compensable losses relating to Dolfin. It is not applied separately to each category of cost. In other words, customers do not receive £85,000 for Custody Asset Transfer Costs and a further £85,000 for Client Money Transfer Costs; the maximum FSCS can pay in total is £85,000.
• Not all Dolfin customers will be “eligible claimants” who are entitled to FSCS compensation. For example, certain corporate customers will not be eligible. FSCS will confirm eligibility when individual claims are submitted.
• FSCS is unable to confirm at this stage when FSCS will open to claims. However, it is likely to be after the Court approves the Distribution Plan, and after the Client Money and Custody Asset return process has progressed substantially.

Once FSCS opens for claims, it will not pay compensation to any customer if they have not yet first crystalised their losses. FSCS considers that customer losses will only be finalised:

• once the Distribution Plan has been approved by the court,
• customers have paid the costs for the return of Custody Assets, and
• the final amount of Client Money to be distributed, as well as the final costs to be deducted, are known.