Christian Orpin Trading as PDS Business Finance
17 January 2007
The Financial Services Authority (FSA) has today published these questions and answers to assist investors of Christian Orpin Trading as PDS Business Finance.
We have recently received several enquiries from members of the PDS Business Finance scheme, and many of those enquiries are similar. This statement should answer these questions and concerns, and summarises the position that the investigation has reached at 12 January 2007.
What is the FSA?
We are not a government department but a company limited by guarantee. We were set up to regulate financial services activities carried on in the UK under the Financial Services and Markets Act 2000 (the Act). We are funded by the financial services industry and are accountable to HM Treasury Ministers.
Why are you investigating Mr Orpin/PDS Business Finance (PDS)?
Our investigation began in the middle of November 2006 after we received information suggesting that Mr Orpin, trading as PDS, was carrying out regulated activities – operating an unauthorised deposit taking scheme – despite not being authorised to do so. These activities fall within our area of responsibility and we have powers under the Act to investigate this.
What action have you taken?
On 24 November 2006 the High Court granted our application for restraining and freezing orders against Mr Orpin, Mr Vickery and Orpery Limited ('the defendants'). The restraint order prevents the defendants from continuing with the activities in question and the freezing order limits the extent to which the defendants' assets may be used or spent.
Did you have enough evidence to take the action that you did?
When the High Court granted our application for restraining and freezing orders, the court had to be satisfied that the case met the relevant criteria, which included protecting the interests of investors. All three defendants took legal advice and, on 1 December 2006, agreed to those orders continuing. So far they have not applied to remove the orders or presented evidence to challenge what we submitted to the court.
How many complaints have you received from PDS investors?
We received no complaints before we took our court action. We acted based on information that suggested the activities that Mr Orpin/PDS were carrying out breached the Act. This is enough for us to begin an investigation.
Was Mr Orpin only technically in breach of the Act as he did not have the correct licence?
Mr Orpin was not authorised to accept deposits from members of the public by way of business. We believe his conduct was in breach of the Act. Such a breach is a criminal offence which, on conviction on indictment, carries a penalty of up to two years in prison and/or an unlimited fine. Because Mr Orpin was not authorised to carry out these activities, investments made with him are not protected by the Financial Services Compensation Scheme.
Were you more concerned with closing down PDS than protecting the investors? Why not allow the business to continue while this apparent breach was sorted out?
Our main objective in taking action is to protect the interests of consumers. Confidentiality restrictions mean we cannot publish all information about our investigations. However, we can say that this investigation led us to believe that around 180 investors invested over £10 million into the scheme promoted by Mr Orpin and run by him under the name PDS. Also, although investors were asked to send their money to PDS, it appears that they were not aware that PDS was lending this money to Orpery Ltd to buy properties. Mr Orpin is a 60% shareholder in Orpery Ltd and the financial data he gave us estimates the total value of the properties purchased by Orpery Ltd was approximately £6 million. This means there appeared to be a substantial shortfall in assets of at least £4 million available to repay investors their capital. This did not include PDS's heavy commitments to pay interest to investors each month at a rate in excess of 35% p.a. This shortfall was growing daily as PDS accepted more money from investors and continued to pay large amounts of interest each month. Because of this, we decided it was necessary to stop PDS's activities and prevent it dealing in its assets while we continued the investigation and found a suitable means to repay investors.
Was your action unreasonable?
We are aware that some PDS investors feel our action was unreasonable. We took the steps we did because we believed the activities being conducted were not only unlawful, but there was also considerable risk of substantial losses to a large number of investors if we allowed the business to continue. While we still have to determine the extent of the shortfall in the value of assets against sums owed to investors and others, we have alleged in court (based on details provided by Mr Orpin), that the shortfall may be more than £4 million. Because of this, we took action we considered necessary to protect the interests of investors. As we believed the financial position could only get worse, the risk to investors was so serious that we concluded it was reasonable to stop PDS doing business.
PDS was paying my interest on time and as agreed – why did you intervene?
Investors were being paid £150 a month for every £5,000 they invested with PDS, which on a yearly basis is more than 35% interest. However, according to information provided by Mr Orpin, the income from the properties held by Orpery Ltd was substantially less than the amount PDS paid its investors. This meant that some of the money invested with PDS went towards paying interest to other investors, rather than purchasing properties. So, while the debts steadily increased, assets were not bought at the same rate as new money was invested with Mr Orpin/PDS. Because of this we took action to prevent more breaches of the Act and to ensure this shortfall did not continue to rise.
Do you care that investors are now in real financial difficulty having lost their regular monthly income?
We do care about the interests of the PDS investors. We acknowledge our actions to safeguard the interests of investors would have had an immediate and serious impact on their financial position. However, we had to take the action we did because the longer that we allowed the scheme to continue, the larger the gap between assets and debts to investors would have become. This would have increased the potential loss to investors. We wanted to ensure that some investors did not take more money than others simply because, for example, their investments matured earlier than those of other investors. And we also wanted to stop others from joining the scheme which was not authorised to accept their money.
Was there no other way that you could have dealt with Mr Orpin/PDS?
We sympathise with the plight of PDS investors but, because of the reasons we explain above, there is no quick or simple means to rectify the matter where there does not appear to be enough funds to repay investors in full. The restraint and freezing orders hold the position until we can resolve the financial and legal issues and money can be repaid to investors by a fair process that protects their interests.
Have you over-reacted and now caused the situation you tried to avoid?
We understand why some investors may think this on the limited, and sometimes inaccurate, information which they may have been given. However, on the information available to us (both from Mr Orpin and others), we believe the scheme posed a considerable risk to consumers, so we took swift and decisive action. If we had allowed the scheme to continue, more investors would have been drawn into it, attracted by the very high rates of interest on offer. These interest rates were unrealistic and unsustainable, and would have eventually led to greater potential investor loss.
What is happening now?
Orpery Ltd has now gone into liquidation because of voluntary action taken by its shareholders. Gary Pettit and Gavin Bates, partners of Business Recovery & Insolvency (BRI) of 100-102 St James Rd, Northampton, NN5 5LF were appointed joint liquidators by its creditors (mainly Mr Orpin). We understand that BRI have already contacted investors advising them of their appointment. We are currently discussing proposals for repaying investors with Mr Orpin, Mr Vickery and BRI..
What do you think of BRI's proposal that investors' claims are dealt within Orpery Ltd's liquidation?
We cannot advise you on this and we would suggest that you take your own independent legal advice before you agree to any arrangement which may affect your rights of recovery against Mr Orpin.
As PDS' offices are now closed, how will investors be kept up to date with developments?
We will publish more information on the consumer pages of our website (www.moneymadeclear.fsa.gov.uk) over the coming months to keep you up to date. We are also discussing with Mr Orpin's solicitor the need for contact details where you can get more information about recovering your investments.
If Orpery Ltd is in liquidation, how are PDS investors going to be repaid?
As we stated above, we are in discussion with Mr Orpin, Mr Vickery and the liquidators of Orpery Ltd to ensure there is a fair process in place that adequately protects their interest and that will help repay investors. Orpery Ltd must repay loans PDS made to it. The responsibility for repaying investors lies with Mr Orpin.
How long will it take before I get my money?
We cannot say at the moment. The process may take many months and depends on the method that is adopted to repay investors. This is because investors' claims are against Mr Orpin and not Orpery Ltd. Orpery Ltd's main assets are in property which will need to be sold.
Will I get all my money back?
We cannot easily answer this question. There appears to be a significant shortfall in assets to repay each investor in full. However, this will be considered when the most appropriate way to repay investors is looked at. .
Can you keep investors fully informed of details of the investigation and later discussions with Mr Orpin, Mr Vickery and the liquidators of Orpery Ltd?
We shall update the information regularly – initially about once a month. However, we cannot give you confidential information other than in specific circumstances. For example, until certain information that we acquire during investigation comes into the public domain (usually following hearings in open court), much detailed information may not be available to investors or other members of the public. Also, we may have to treat other information given to us during discussions about the possible repayment mechanism as confidential, at least until formal proposals can be made to investors or as agreed with those involved.