Investors could go down with broker

SCORES of private investors have been caught up in the collapse of stockbroker SP Bell after their accounts were used to buy more than a million shares in a technology firm without their knowledge.

SP Bell and its owner Simon Eagle are being investigated by the Financial Services Authority after a planned merger between the company and listed broker Merchant House was called off last month, amid allegations of a black hole in SP Bell's accounts.

But Financial Mail has learned that 75 private clients of SP Bell have been caught up in the affair and some face bills of up to £500,000 to pay for shares they claim they never agreed to buy. Some could face bankruptcy.

Clients' accounts were allegedly used without their knowledge to buy shares in computer company Fundamental-e, chaired by Eagle.

On holiday in France, Eagle said: 'There was a mis-allocation of stock to individual client accounts. The largest component of that was shares in Fundamental-e.'

He refused to explain how the 'mis-allocation' took place. He added: 'These clients are just innocent parties who have got caught up in this.'

It is understood the clients are being asked to pay for the shares by Pershing Securities, which acted as the clearance and settlement house for SP Bell and did the buying and selling. About 102m shares are thought to have been traded in Fundamental-e.

A spokeswoman for Pershing Securities confirmed that the company was trying to recover money from individual clients of SP Bell. 'As with any business transaction we do ask the clients to meet their liabilities,' she said.

SP Bell, however, has collapsed and administrator David Rubin is seeking to liquidate the business.

Rubin said: 'There are people facing bankruptcy if these claims go ahead.'

The irregular deals came to light on June 15, hours before SP Bell was to be taken over by Merchant House. That deal would have seen Eagle as chairman of the enlarged business with a 24% stake worth at least £2 million.

When the irregularities emerged the deal was called off. Eagle has resigned from Fundamental-e.