Regulators in Guernsey and Jersey are collaborating in efforts to clear up the fallout from the collapse of a fund and to recover investors' money. A protected cell company is now in administration and an independent financial advisor is under investigation.

The Guernsey Financial Services Commission recently applied successfully to the Guernsey Royal Court to place a Guernsey protected cell company, Providence Investment Funds PCC Ltd, and the fund manager Providence Investment Management International Ltd, into administration followed by the placing of the Guernsey based parent company, Providence Global Ltd, into liquidation.

The Jersey Financial Services Commission has been supporting the actions of the GFSC, particularly the appointment of administration managers to Providence Investment Funds, on account of the exposure of Jersey investors to the PCC's misfortunes. Both regulators hope that these managers will help to recover investors' money.

Investors in Jersey invested in Providence Investment Funds and the JFSC has therefore been working closely with the GFSC on this case. The JFSC is investigating the advice provided by Lumiere Wealth Limited, a Jersey independent financial advisory firm, to its clients in respect of Providence Investment Funds. Lumiere Wealth was licensed by the JFSC on 16 April 2015 as a Class D Investment Business (which allows an entity to advise on investments but not hold clients' assets).

The US Securities and Exchange Commission is taking against Providence Financial Investments Inc and the Providence Fixed Income Fund LCC, including the founder of the Providence Group Mr Antonio Buzaneli. On 26 August, Judge Susan Richard Nelson of the District of Minnesota issued an order requiring Buzaneli to surrender his passports and prohibiting him from leaving the US until further notice. The order also froze his assets in the US and required him to repatriate the remainder.

The SEC's complaint, submitted in a federal court in Minnesota, alleges the following.

• Providence Financial and Providence Fund raised more than $64 million from more than HNW 400 investors throughout the United States through the unregistered sale of promissory notes that generally pay annual returns of 12-13%.
• Providence Financial and Providence Fund told investors that their investment proceeds would be used to fund the 'factoring' of accounts receivable in Brazil. On the contrary, the complaint alleges that Providence Financial and Providence Fund spent, at best, less than 68% of their investors' money to finance Brazil factoring transactions, and both companies have been unable to account for how they spent the remaining 'investor proceeds.'
• Uses of investor funds that were not disclosed to investors included the payment of 6% annual commissions to unregistered brokers for selling the promissory notes as well as the payment of millions of dollars to Providence Financial and Providence Fund insiders.
• In addition to misleading investors about how they would use those investors' funds, Providence Financial and Providence Fund have run into serious financial trouble.
• Both companies hold very little cash or liquid assets, while the amount of money owed to investors appears to dwarf the value of any Brazilian investments they hold. These problems are exacerbated by a highly unfavorable foreign exchange rate which hinders the repatriation of Brazilian assets to repay investors in the US. As a result, the only way Providence Financial and Providence Fund are repaying their current investors is through the proceeds of new investments.
• Two men, Jeffory Churchfield and Jack Jarrell, acted as unregistered brokers and sold unregistered securities, with Jarrell flouting the Investment Advisers Act by failing to disclose his pay to his advisory clients.