Asset-managers in the UK should ask the regulator about every investment scheme that their clients are considering, or they might end up with a Ben Wilson on their books. This is true even when their clients are 'sophisticated investors' and ought to know better.

Wilson of Bournemouth in Dorset has been sentenced to seven years at Southwark Crown Court defrauding investors of over £21m. Sources close to the case say that some of these were 'sophisticated investors' (as defined in the Financial Services and Markets Act 2000) and high-profile people in the investment industry into the bargain.

The sentence included seven years for fraud, 18 months for not being authorised by the Financial Conduct Authority and two and four years for counts of forgery, with all the terms to run concurrently. This is the longest sentence for anyone prosecuted by the Financial Conduct Authority (FCA) and the second longest for either the FCA or its predecessor, the Financial Services Authority (FSA).

Sentencing Wilson, Judge Grieve said: "It was an utterly shameless confidence fraud. The purpose was to give [Wilson] a lifestyle of untold lavishness and luxury."

Unauthorised investments

Wilson pled guilty in December 2013 after it was found that the unauthorised investment firm he ran, SureInvestment, was a sham that had cost investors millions. More than 300 investors trusted Wilson with £21.8 million. When the FSA closed the scam down, £17.54 million was owed to investors and it is estimated that £5.39 million in total will be recovered.

Our source added: "He continued to get money out of these sophisticated HNW investors even after the FSA froze his business, which I think happened in October 2010 but don't quote me on that. Don't quote me on anything." The FSA did, indeed, obtain a court order to freeze assets and restrain the unauthorised activity at that date. When the scale of Wilson's dishonesty became clear, the FSA began a criminal investigation. He was arrested and his house and offices searched in a joint operation with Dorset Police. Wilson nevertheless ignored the FSA High Court injunction and kept going.

Wilson set up SureInvestment in 2003 when he was 24 years old. Within a few months the FSA was telling him that he had to be authorised to continue to trade or had to close down. Wilson later lied to the FSA, claiming that he had wound up the firm and repaid his investors. To verify this the FSA contacted investors but uncovered nothing because Wilson had persuaded them to tell it that he had returned their money, whereas in fact he had persuaded them to invest in a separate ‘overseas’ fund.

Actually, Wilson had placed the money in his personal SureInvestment UK bank account. Only 20% of all monies that investors gave him between 2003 and 2010 was ever traded and when Wilson did trade, despite his claims to be a 'maestro', he invariably lost money. During the lifetime of the scheme, Wilson took £21.8 million from investors. Of that, only £4.2 million was ever traded, with Wilson losing £2.25 million. The money that came in from credulous new investors paid those who wished to withdraw their funds, Ponzi-style.

Lessons to be learnt

The lesson that the average wealth advisor must draw from this escapade is that it is vital to ask the regulator about every investment scheme that the HNW is considering. The FSA would undoubtedly have told investors after October 2010 that it had frozen SureInvestments' resources and indeed the civil court order would have been public and therefore detectable to the assiduous wealth advisor/manager. However, Wilson was crafty enough to persuade investors to tell the FSA that they had been repaid and this must have been something of a bar to successful 'due diligence' at the time.

He also spent large sums creating the impression that his firm was modish and successful. £4.8 million went on an exclusive office in Poole, complete with bar, massage room, games area and life coach. It was also filled with ‘traders’ who were merely doing simulated computer trading. Many felt lucky to have a job and to be learning from a trader of purported genius like Wilson, so much so that many persuaded their family and friends to invest. HNWs are vulnerable to such shows of prestige.

Another lesson that wealth advisors might ponder is that even 'sophisticated investors' are gullible when somebody plausible offers them staggering gains. This happens for the same reason that '419' fraudsters (who offer large sums to anybody who will help them indulge in some money-laundering, but then defraud their subscribers of some relatively small handling fees and disappear) often target HNWs – because many of them are entrepreneurial and therefore willing to take a chance themselves.