Court decides what to do with £220k belonging to “unknown clients”

Thursday 15 August 2019

The Royal Court has been forced to decide what to do with over £220,000 held by a local investment business on behalf of “unknown clients”, after it struggled to track them down to hand the money back.

HSBC Global Asset Management Limited (AMJE), which was originally supposed to be wound up last June, had previously provided wealth management services to 449 clients and held assets worth around £454million.

In 2016, it wrote to clients to advise them it was to stop providing services and ask what they wanted to do with their assets. The letter informed clients that if they didn’t reply, the assets would be sold, and the proceeds sent to them.

The vast majority of clients replied but AMJE was unable to identify what was described as “a comparatively small number of clients.” 

It therefore sold all the assets on behalf of those “unknown clients”, generating £223,009 and US$5,009 (£4,145.85).

Pictured: AMJE wrote to its clients asking for instructions, but a small number did not reply.

Having ceased trading and liquidated all of its investment assets, AMJE - which was described as “a solvent but dormant company… currently serving no purpose” - couldn’t be dissolved while it still held the money. 

The company subsequently made one last bid to trace the customers.

Working with its liquidators, the firm tried to contact the clients using their last known details, as well as searching HSBC’s customer directories, the internet and social media to find more recent details and contacted administrators for corporate clients. 

They also considered using tracing agents to find the anonymous wealth-owners, but this was deemed too costly. Advertising in the local media and in the Gazette was also decided against, as it would probably not work due to the firm’s formerly international client base.

Moving the money to another wing of HSBC would have created regulatory issues, it was concluded, while giving the cash to charity was similarly problematic.

Pictured: The company attempted to trace the clients by searching the internet and social media sites.

Donating the cash to Sharegift - a UK charity specialised in aggregating small shareholdings that are too small to sell or otherwise cannot be sold - was considered, but decided against on the basis that the assets were not truly theirs to donate. 

With no other option, AJME decided that transferring the money to the Receiver General – who administers the affairs of the Crown’s estate in Jersey –  was the best course of action.

The Receiver General agreed to the transfer, as well as the procedure to follow if any of the ‘Unknown Clients’ wants to get their money in the next 10 years.

Under the procedure, the clients will have to pay an administration fee of £500 or 5% of the value of the asset transferred – whichever is the greater – to the Receiver General if they want to recover their money.

The transfer was approved by the JFSC as well the Comptroller of Income Tax and AMJE also sought the approval of Royal Court. 

Pictured: The Royal Court approved the transfer.

The case was heard by Royal Court Commissioner Julian Clyde-Smith, O.B.E, sitting with Jurats Colette Crill and Pam Pitman.

The Court noted in its judgment that, had it refused the transfer to the Receiver General, both AMJE and the liquidators could face claims from the “unknown clients” for disposing of the money. “In circumstances where AMJE has acted in good faith and in full compliance with its regulatory obligations, that would be unjust,” the Court ruled.

Noting that the firm had made “all reasonable attempts” to trace the anonymous clients, it added: “The Unknown Clients have also not made any recent attempts to contact either AMJE or HSBC, with many positions being over 15 years old (with some as old as around 30 years).”

The Court therefore approved the transfer to the Receiver General.