Client Asset Confirmation Statement (sent September 2024) 

Q: Will advisers receive the Client Assets Confirmation Statement from the JSAs (BDO)? At present they are not on your portal. 

A: Advisers will not receive the Client Assets Confirmation Statement from the JSAs (BDO), but Stellar Asset Management Ltd (‘SAM’) can arrange copies on request. We do not intend to add these documents to our portal, the Stellar Hub. 

Q: Will the Client Asset Confirmation Statement show how clients can access their money? 

A: The Client Asset Confirmation Statement will show: 

  • Accepted Client Assets Claim  
  • Client Assets Shortfall Claim  
  • Any stock adjustments to held Client Assets post-6 April 2023  
  • Client Assets subject to a Transfer/Distribution  
  • Client Assets which cannot be subject to a Transfer/Distribution  
  • Client Money Entitlement  
  • Corporate Action Receipts received post-6 April 2023 to 30 June 2024 
  • Corporate Action Receipts subject to a Transfer/Distribution  
  • Client’s Costs Contribution  
  • FSCS compensation status 

It will not confirm how the client can get their money. The distribution plan has been approved by the court on 23 July 2024, but the exact dates at which assets will be transferred to our new custodian have not yet been set. 

Q: Will the Client Asset Confirmation Statement show current valuation and what is the baseline for the valuation calculation?  

A: It is not a valuation calculation that has been provided on the Client Asset Confirmation Statement. It is a summary of stock and cash held on behalf of the client(s). SAM will not be able to provide valuation of client portfolios until the assets have been transferred to our new custodian. 

Q: Are the figures quoted on the Client Asset Confirmation Statement the final amounts clients will receive? 

A: Clients will initially receive the share amounts listed in Table 1B – Client Assets to be Returned (units) – “B” and their client money entitlement, in Table 2 subject to any further corporate actions. There are likely to be further entitlements in relation to dividends and corporate actions which will also be applied as well as the FSCS compensation to which eligible clients are entitled.  

Q: Are clients required to review the Client Asset Confirmation Statement? 

A: SAM will be reviewing the information contained within the statements to ensure the veracity of the figures and will liaise directly with the JSAs if we identify any discrepancies. Clients do not need to review the figures themselves, however we are happy to review and forward any queries on to the JSAs should clients identify any incorrect information. 

Q: Will management fees and adviser fees be calculated and paid once funds are accessible? 

A: We intend to calculate and pay all attributable management and adviser fees once the assets have been transferred to our new custodian. These fees will be calculated in addition to any dividends, corporate actions, FSCS entitlement and market performance in each portfolio since the JSAs were appointed. We do not have a specific timetable for this, and it will be dependent on when BDO are able to transfer client assets to our new custodian. 

Q: Third Platform Services are listed as the new broker, who are they? 

A: Third Platform Services (‘TPS’) are our new custodian, the FCA-regulated subsidiary of Third Financial group. TPS is authorised and regulated by the FCA (‘Financial Conduct Authority’) and act as Custodian, Administrator, and ISA Manager for the SAM AIM IHT Service. 

Q: How will SAM ensure the security of my assets going forward? 

A: TPS offer an excellent service and platform with one of its fundamental offerings being a segregated client asset and client money mandate. This is different from what is generally available on the market and means that all SAM AIM IHT Portfolio securities and cash will be held in separate, dedicated accounts and will not be “pooled” or “mingled” with other TPS clients.  

Q: Why did SAM choose not to use the nominated broker (GHC Capital Markets Ltd)? 

A: SAM clients will not be transferring to GHC Capital Markets Ltd (‘GHCCM’) because of the following reasons:   

  • SAM continue to act as Manager for the investment transferring from WealthTek LLP (‘WealthTek’), which are currently controlled by BDO. In order to continue to manage the investments, SAM require Client Assets to be held with our nominated Custodian  
  • BDO has given its approval for SAM clients to transfer directly to TPS  
  • TPS is aware of our position with regards to WealthTek clients and is fully prepared and ready to accept these investments   
  • Transferring to TPS is the most efficient and quickest way to repatriate clients with their assets. The alternative would have been to transfer Client Assets to the nominated broker and subsequently transfer them again to TPS, which would cause additional work and further delay  
  • GHCCM does not offer the services we require to manage clients’ portfolios in the future 

Q: How will the funds be transferred from WealthTek to BDO? 

A: The return of Client Assets will be in tranches, with the initial return of individual stocks and cash allocated, as set out in the Distribution Plan and subsequent Client Asset Confirmation Statement. We believe the FSCS (‘Financial Services Compensation Scheme’) compensation payments will also be included in the transfer for eligible claimants who have lodged their claim, however we will confirm the exact details in due course. 

Client Asset Statements (sent February 2024) 

Q: Will advisers receive the Client Assets Statement from the JSAs (BDO)? At present they are not on your portal. 

A: Advisers will not receive the Client Assets Statement from the JSAs (BDO), but Stellar can arrange copies on request. We do not intend to add these documents to our portal, the Stellar Hub. 

Q: Will the Client Asset Statement show current valuation and what is the baseline for the valuation calculation?  

A: It is not a valuation calculation that has been provided on the Client Asset Statement. It is a summary of stock and cash held on behalf of the client(s). This summary is as of 6 April 2023, when BDO was appointed as JSA’s to WealthTek, and highlights any shortfall in cash and stock holdings which will be eligible for a claim to the FSCS. 

General

Q: What happened? 

A: On 5 April 2023, Stellar Asset Management Limited (‘SAM’) was informed by BDO LLP, 55 Baker Street, London W1U 7EU that members of its firm had been appointed, on 4 April 2023, as joint Interim Managers (the ‘JIMs’) of WealthTek LLP (the ‘LLP’), pursuant to Regulation 7(1)(d) of the Investment Bank Special Administration Regulations 2011. 

From 4 April 2023, the FCA imposed requirements for the LLP to immediately cease carrying on all regulated activities for which it has a Part 4A permission (other than where it has the express written consent of the FCA). 

With effect from 6 April 2023, WealthTek LLP, trading as Vertem Asset Management and Malloch Melville, has been placed into Special Administration following an application to the High Court by the FCA. 

Shane Crooks, Mark Shaw and Emma Sayers, licensed insolvency practitioners from BDO LLP, have been appointed as Joint Special Administrators (the ‘JSAs’). The Special Administrators are now responsible for the affairs of the LLP. The LLP remains regulated by the FCA, albeit certain restrictions are now in place to prevent the LLP (including under its other trading names) from undertaking any regulated activities. 

The Joint Special Administrators are working closely with the FCA as they carry out their duties. 

WealthTek was appointed by SAM to act as custodian and to provide related services for clients in relation to our AIM IHT Portfolio Service. 

We have been advised by the JSAs that following the cessation of regulated activity, no trading can take place on any of the accounts, including purchases, sales, top-ups, or withdrawals. 

Our priority is to work with the JSAs to ascertain the security of all client assets and ensure that management of the accounts can be re-established as soon as possible. We will ensure that we update all concerned parties as soon as we are able. 

Please see the attached FAQ provided by the JSAs in relation to the change. 

Q: What does special administration mean? 

A: Special administration is a formal insolvency procedure that is used in cases where a business holds client money and is regulated by the FCA.

This procedure is designed to protect the interests of the company’s customers and clients, and to ensure that the business’s assets are managed and distributed in an orderly and fair manner. 

Administrators are appointed by the FCA and has the authority to take control of the business, assess its financial situation, and develop a plan for its future. 

Q: Are my (client’s) assets secure? 

A: The JSAs are currently conducting their review of the assets under WealthTek’s control including those invested via the Stellar AIM IHT Service. 

Their priority, and ours, is to ascertain the security of all client assets and ensure that management of the accounts can be re-established as soon as possible. 

We will update all stakeholders as soon as we have further information. 

Q: Have I (my clients) lost money? 

A: In February 2024, the JSAs published Client Asset Statements detailing each client’s holdings as of 6 April 2023 and any shortfall to which their holdings were attributable. 

The FSCS has confirmed that, for eligible customers, the FSCS Compensation Scheme will be available (see further details below).  

Q: Is any client money held with Stellar Asset Management Ltd (‘SAM’) directly? 

A: No. SAM is not authorised to hold client money. SAM is the Discretionary Investment Manager for the service only. 

WealthTek was appointed by SAM to act as custodian and to provide related services for clients in relation to our AIM IHT Portfolio Service including ISA Portfolio Service. 

The depositary used by WealthTek for the custodian services was CACEIS Bank. 

Q: How long will this process take? 

A: The exact timeline for distribution of the assets has not yet been set but, as soon as we have more definite information on the likely timeline from the JSAs, we will confirm to clients as soon as we are able to give more information. 

  •  In February 2024, the JSAs published Client Asset Statements detailing each client’s holdings as of 6 April 2023 and any shortfall to which their holdings were attributable.  
  • On 23 July 2024, the JSAs Distribution Plan was approved by the Court. 
  • In September 2024, the JSAs published Client Asset Confirmation Statements giving further information to client’s regarding their holdings and the upcoming asset distribution. 

Q: What is the Distribution Plan and when will it be announced? 

A: The Distribution Plan will set out how Client Assets will be returned to Clients and how the costs of the Special Administration will be allocated. The Distribution Plan must be approved by both the Clients’ and Creditors’ Committee (‘CCC’) and the Court. On 23 July 2024, the Court approved the JSAs Distribution Plan. 

Q: Are my (client’s) investments covered by the Financial Services Compensation Scheme (‘FSCS’)? 

A: FSCS protects customers when authorised financial services firms fail. In the event that your (client’s) investment cannot be fully realised or transferred to another custodian, clients could be entitled to compensation of up to £85,000 per person. 

FSCS has a webpage specifically for WealthTek related claims that they are regularly updating. On 14 September 2023, FSCS confirmed that, for customers who are eligible under FSCS rules, they are likely to meet any losses suffered in relation to the following; 

  • the costs of returning client money to the customer and; 
  • the costs of transferring any assets to a new broker – provided the particular assets are covered by FSCS’s rules. 
  • client money shortfalls, that have occurred as a result of WealthTek not holding all the client money that it had undertaken to hold for that customer; and 
  • client asset shortfalls that have occurred as a result of WealthTek not holding the client assets it had undertaken to hold for that customer. 

Any compensation payable by FSCS is subject to the statutory cap of £85,000 per eligible customer, per firm. 

FSCS are, along with SAM, one of the five members nominated to the CCC, and we are both working closely with the administrators to ensure we are able to update affected stakeholders as soon as possible. 

Q: What will happen to the management of my (client’s) assets during this time? 

A: Until the JSAs have conducted their review of WealthTek’s assets, SAM will be unable to make any changes to the portfolio.  

Q: Will I receive any dividends declared and paid by investee AIM companies? 

A: The JSAs have established a system for recording and reconciling cash receipts arising from the payment of any dividends. The funds related to such receipts will be distributed alongside and consistent with the distribution of the Custody Assets to which the receipts relate, and further details will be provided in the eventual Distribution Plan. 

The Distribution Plan set out how Client Assets will be returned to Clients and how the costs of the Special Administration will be allocated. Further details of corporate action proceeds were provided to clients in the Client Asset Confirmation Statements, published in September 2024, and we expect the JSAs to make available statements confirming all payments to which clients are entitled available once the assets have been transferred. 

Q: Can clients access their investments held via WealthTek? 

A: Client portfolios as of 31 March 2023 can be viewed using the SAM client portal (the Stellar Hub). Access to the WealthTek portal will be unavailable from 10 May 2023. 

Q: Can I withdraw my (client’s) funds? 

A: No. The JSAs have frozen all assets with WealthTek until their review is complete. We are working closely with the JSAs and the FCA to ensure that this is resolved as quickly as possible. 

Q: Will investment management or adviser fees still be deducted from portfolios held with WealthTek?  

A: No. At the current time, no withdrawals or transfers of client money or assets are being processed to ensure that all clients are treated equally – this includes fees for the service. 

SAM has not collected its management fees (due quarterly) since 1 January 2023 and SAM will not debit management fees whilst the portfolios are frozen, however these will be charged to client accounts, where eligible once client assets have been transferred to our new custodian. 

Any ongoing adviser charging due since 1 January 2023 cannot be charged to portfolios and will be unable to be paid to authorised advisers until client assets have been transferred to our new custodian. 

Q: How do I access my (client’s) latest reports? 

A: While the JSAs are conducting their review, there will be no further production of regulatory documents, including valuations, consolidated tax vouchers (‘CTVs’), or costs & charges documentation. 

Q: What was the outcome of JSAs report following their initial 8-week consultation period? 

A: The full report issued by the JSAs can be found here. While the report gives some information relating to the overall picture at WealthTek, we do not have enough clarity to give specific information to our clients regarding the security of their assets. 

We will continue to work closely with the JSAs to establish these details so we can communicate with all affected stakeholders. 

Q: The JSAs initial report indicates difficulty in reconciling unit trust investments, does this affect me (my client)? 

A: No. All of SAM’s WealthTek clients were invested in CREST-eligible equities only, which we believe to have been held by CACEIS in a pooled, segregated nominee company. 

Q: Why did Stellar engage WealthTek LLP as custodian? 

A: WealthTek’s custody solution provided several key benefits relative to both its previous custodian and other providers in the market, namely: 

  • reduced costs for our clients: 
  • a flat dealing fee, 
  • a lower annual administration fee 
  • significantly greater control of trade execution 
  • enhanced client portal and portfolio analytics 
  • improved system functionality and portfolio administration 

The portfolio management software available to us on WealthTek is market-leading and has been a significant differentiator compared to other custody and platforms in the market. 

WealthTek is/was authorised and regulated by the FCA. 

Q: Will this impact my (client’s) funds on platform (abrdn/M&G/Platform One/Transact)? 

A: No, assets invested in the Stellar AIM Portfolio Service via platform are held via a completely different custodian. The AIM management team will continue to provide the same high quality management clients have experienced previously. 

Q: What are the implications for Business Relief qualification during the Special Administration? 

A: Qualifying AIM shares properly held in custody by CACEIS will continue to offer potential Business Relief. While client assets are frozen, we are unable to manage the portfolio which has implications in light of certain corporate actions which we will seek to detail after the assets have been transferred to our new custodian. 

Q: Where can I find more information? 

A: We will provide updates on meaningful developments. Customers can find more information about how they will be affected via: 

  • Client Helpline: 020 3195 3500 

This update is intended for use by financial intermediaries and clients who have invested in the Stellar AIM IHT Portfolio Service via WealthTek. This document contains information provided by third parties, such as the JSAs, and no responsibility can be accepted by Stellar Asset Management Ltd for the accuracy of this information. 

Stellar Asset Management Limited is authorised and regulated by the Financial Conduct Authority under FCA number 474710. Registered in England and Wales No. 06381679. Registered Office: 20 Chapel Street, Liverpool, L3 9AG.