Jersey Investor Sues Over Inappropriate Investment Advice

by Philip Morton, Investors Offshore.com

26 May 2003

According to the Jersey Evening Post, Susan Mary Sangster, an Island-based investor is suing her investment adviser, Timothy Nicholas Scott Warren, the Cater Allen Trust Company (Jersey) Ltd (since acquired by Close Brothers), and the Close Trust Company (Jersey) Ltd, alleging that she did not receive investment advice appropriate to her status as an inexperienced investor, and that the defendants did not exercise the care and due diligence required.

The JEP revealed that in an Order of Justice, Mrs Sangster has alleged that following her divorce, she was advised to invest more than £4 million of her divorce settlement by her accountants, who introduced her to the then managing director of Cater Allen Trust Company, Mr Scott Warren.

A Jersey-registered company, Gretna Ltd was established on her behalf, and according to Mrs Sangster, Mr Scott Warren agreed to provide specialist investment advice, on the understanding that she had limited knowledge of the financial markets, and was managing her financial affairs on her own behalf for the first time.

According to the JEP, the Cater Allen MD invested £1 million and $500,000 with a recommended fund manager at Cazenove & Co Suisse SA, informing the fund company that she was aiming for high returns, and accepted the increased risks entailed by that.

However, Mrs Sangster claims that she was not informed of the risks at the time that the investment was made (February 2000), and did not receive a copy of the Cazenove mandate until August 2001.

She also argued that she was not made aware of several changes of management of the investment, and a substantial drop in its value to just £427,646 in shares and £230,000 in cash.

However, the three defendants have reportedly denied charges of negligence and breach of the retainer, explaining that they only provide trust and company administration to private clients, and have never offered specialist investment services to Mrs Sangster.

The Jersey Evening Post report concluded by revealing that:

'They specifically deny that Mrs Sangster had never previously had to manage her own financial affairs and claim that she was an experienced and 'relatively sophisticated' investor. They claim that the investments were 'appropriate' for Mrs Sangster, that the total portfolio was diversified to provide a proper and balanced element of risk, and that Mrs Sangster understood and accepted the level of risk.'

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