Administration: Director responsible for legal practice left suddenly
A wealth management firm that a decade ago became one of the first to adopt dual regulation by the Solicitors Regulation Authority (SRA) and Financial Conduct Authority (FCA) has gone into administration.
According to the administrators, BTG Begbies Traynor, the loss of the person on whom the legal practice depended was a major contributory factor in the failure of Manchester-based LCM Family.
We reported just under a decade ago that LCM Wealth Management – as it was then called – had obtained an alternative business structure licence from the SRA after the amount of legal work it was outsourcing to law firms reached a “critical mass” – it was sending out about £120,000 worth of work a year – and it made sense to bring it in-house.
BTG said LCM acted as a provider of financial, legal, tax and wealth management advice to approximately 300 individual clients across 50 family groups. Assets under administration as of last week were valued at around £89m.
“The firm traded profitably for a number of years. In recent years performance has suffered as a director took time away from the business due to ill health. During this period, there was a material reduction in investment activity and subsequently turnover,” BTG recounted.
“Whilst the financial position began to improve as the director returned to the business and investment activity increased, there has been a rapid operational deterioration with the sudden departure of a director responsible for the firm’s legal practice.
“Compounding the position there has also been a sudden increase in the number of client complaints related to the maturity of call warrants at nil value, which has contributed to an unaffordable renewal quote to obtain professional indemnity insurance.”
These events led LCM to approach BTG for advice on the available options and also notify both the FCA and SRA of its position.
On 14 April, following concerns raised by the FCA, LCM agreed to impose voluntary restrictions on its FCA-regulated activities to preserve its asset position and mitigate the risk to its clients and creditors. A fortnight later, it appointed administrators.
The SRA has marked the firm as closing down and, according to BTG, all legal documents and live matters it was handling were handed back to clients or transferred to another firm at clients’ request prior to the administration.
All client monies were returned before the administration as well.
Separately, the SRA yesterday intervened into West of England law firm BLB Solicitors after it went into administration last week.
BLB had around 40 staff working from an office in Bath and three in Wiltshire (Swindon, Trowbridge and Bradford on Avon), as well as meeting spaces in Bristol. It has been reported that it went into administration after a sale of the business fell through.
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