THE HIGH Court has appointed inspectors to Dublin wealth management company Custom House Capital to investigate the affairs of the company on an application by the Central Bank amid serious concerns about its operations.
The Central Bank said in a statement it sought the appointment “due to new information arising which led to significant concerns about the firm’s operations”.
George Treacy, head of the Central Bank’s division that supervises investment companies, and Noel Thompson, a manager in the division, were appointed inspectors to the company late last Friday.
Accountants KPMG were also appointed to support their inspection into Custom House Capital.
The Central Bank said it had “taken this action in order to evaluate the records of the firm relating to client assets and customer holdings and to assess the financial position of the firm”.
Restrictions have been placed on the firm preventing it from “carrying out any transactions or any payments to any clients in order to protect the interests of all existing clients until the impact of these issues have been established”, the Central Bank said.
A report on the preliminary findings of the inspection must be submitted to the court on Wednesday.
The application was made under the European Communities (Markets in Financial Instruments) Regulations 2007.
Custom House Capital specialises in pensions for wealthy customers and manages investments of about €1.5 billion for about 1,400 clients. The firm also invests in property in France and Germany on behalf of clients.
The Central Bank made the court application after concerns were raised by another investment firm, Appian Asset Management, which had taken over the non-property investment assets of Custom House Capital last month.
Appian told clients last week it was “terminating all arrangements with CHC and related to CHC” after taking over as investment manager of about €250 million in non-property assets at Custom House Capital. These assets related to 600-700 clients.
“In the course of arranging an orderly transfer of the underlying CHC assets, Appian became concerned about a number of matters,” the firm said in a letter.
“CHC did not satisfy these concerns and Appian brought those concerns to the attention of the Central Bank of Ireland and requested Central Bank intervention. Appian are pleased that the Central Bank has now intervened and issued directions.”
Mr Treacy wrote to Patrick Lawless, managing director of Appian last week, noting the disclosure of “serious concerns” identified by Appian at Custom House Capital.
Mr Lawless circulated the letter with his letter to Appian’s clients.
The concerns related to “the previous operation of investment management agreements recently assigned from another regulated entity”, Mr Treacy said.
“Appian Asset Management Limited has acted properly and professionally by bringing these matters promptly to our attention,” he said. “The Central Bank views your report extremely seriously and will take steps to fully and appropriately investigate the concerns raised.”
Auditors to Custom House Capital raised concerns in the company’s 2010 accounts, referring to the “existence of a material uncertainty, which may cast significant doubt about the company’s ability to continue as a going concern”.
The company was “significantly reliant on the recoverability of debtor balances from property-related entities”, the auditors said.
The firm increased its share capital by €1.29 million during the financial year to March 2010 – the period for which the most recent accounts are available. Some €300,000 of this came from two of the company’s directors, Harry Cassidy and John Mulholland.
