Investors who have been mis-sold mini-bonds by the firm could be entitled compensation.
Basset & Gold and its sister company, B&G Finance, have both been placed into administration after the FCA raised concerns over the viability of the B&G mini-bond scheme.
The firms raised as much as £36m from 1,800 investors between 2015 and 2020. The FCA has said there is potential for compensation through the FSCS.
Basset & Gold PLC, who issued bonds which were sold to retail customers, was not regulated by the FCA. The sister company however, B&G Finance, was regulated by the FCA. This company acted as an intermediary between the company and its investors, arranging investments in the bonds sold by Basset & Gold PLC. The latest accounts for this company state that it “helps clients find safe homes for their savings”
The FSCS has said it anticipates it may start to received claims from investors against the FCA-regulated B&G Finance, and has clarified that investors have a good prospect of claiming compensation.
The FCA initially raised issues with the mini-bond scheme after almost all of the money was invested into Uncle Buck, a now-defunct short-term credit lender which went into administration on March 27th.
The FSCS stated:
From January 2nd 2018, B&G Finance Ltd arranged and promoted mini-bonds on behalf of Basset & Gold Plc, which issued the mini-bonds.
The FSCS has determined that due to mis-selling of these mini-bonds, many Basset & Gold bondholders who bought their mini-bonds through B&G Finance Ltd may be able to claim compensation up to the £85,000 limit.
For the FSCS to be able to pay compensation, the customer must have been mis-sold their bonds, for example, because they relied on a misleading statement about how Basset & Gold Plc was investing their money.
The FSCS will also check which firm was responsible for the sale of the bonds.
What are mini-bonds?
Mini-bonds are a form of alternative finance for companies wishing to raise capital. The company will issue “bonds” – which are effectively IOU’s – as an alternative to offering equity in the form of shares.
The investor who buys these bonds earns an annual return via interest and can recoup their invest when the bond matures.
Mini-bonds are, however, relatively risky. They are unregulated by the FCA which means that the companies within this arena are not being monitored for hidden charges or any unwanted small print. If the company collapses, you may lose all of your investment and won’t be entitled to compensation from the FSCS.
Typically, mini-bonds are only suitable for higher net-worth individuals who are willing to take a much higher risk than normal investments. The bonds are highly illiquid, which means they cannot be easily converted into cash and often cannot be sold on.
Where investors may be entitled to compensation is if the mini-bonds were sold through an intermediary who is regulated by the FCA, like B&G Finance.
The issue of mini-bond compensation
Mini-bonds have been in the news a fair bit recently, particularly with the collapse of London Capital & Finance last year. Bondholders there have taken the FSCS to court after the majority have not received any compensation since LCF’s collapse.
As mini-bonds are unregulated, the debate has been centred around how the mini-bonds were sold. The FSCS have been investigating ways for compensation, such as evidence of advice being give to bondholders by LCF. For example, earlier this year the FSCS announced it would compensate 135 investors after they were told to transfer out of stocks and shares ISAs, which is a regulated activity.
The LCF debate continues, and the FSCS is still reviewing any possible advice claims but has previously warned many clients that they would not be eligible for compensation.
Mini-bonds temporarily banned by the FCA
Mini-bonds also hit the news recently after the FCA put a stop to all promotion of speculative mini-bonds for 12 months, starting from January 1st 2020.
The ban is centred around the sale of speculative mini-bonds to small investors who do not have the experience to evaluate to risks involved in complex arrangements. The ban, announced in November 2019, focusses on more complex and “opaque” arrangements where the investments are used to lend to a third party, invest in other separate companies, or purchase/develop properties.
How can Smooth Commercial Law help?
At Smooth Commercial Law, our team of solicitors have extensive experience in dealing with a whole manner of claims that arise from negligent and/or unsuitable financial advice. We are seeing an increase in claims for mis-sold investments, and have managed to secure compensation for many of our clients.
Should you have a claim, we can deal with your case and look to recover compensation for not just your loss of investment but also any adverse tax liabilities that you may now be facing as well.
You can contact our experienced team by calling *ruler number* or by emailing email@example.com.