Rebus Investment Solutions Limited, a company which helps investors recoup losses from complex investments which they have been mis-sold, has successfully won a case which it describes as “unprecedented” against 20Twenty Independent Ltd, worth almost £2.6m.
Five clients were advised to invest in the Crossover Film Partnerships, promoted by Crossover Capital, but the advisers misrepresented the scheme by failing to make the investors sufficiently aware of the high level of risk inherent in the scheme, especially since the loans were full recourse to the investor, Rebus said.
The case hinged on whether the investors should be held liable for these full recourse loans that came as part of the investment, and which the adviser categorically stated would never be an issue, as they were apparently guaranteed.
Although the scheme qualified for tax relief, the adjudicator concluded that the investment was so risky investors should have been made fully aware it could lead to a “total loss of possibly more than three times their initial contribution”. Moreover, there was no reference made to the affordability of the gearing within the scheme.
Rebus said that as a result of the investment, the claimants faced demands for the repayment of loan capital and interest.
The ombudsman enforced a reward of the maximum £100,000 amount, “despite each individual facing much larger losses as a result of mis-selling”.
Rebus is now looking into recovering the remaining £2.1m amount through the courts.
Philip Roberts, ombudsman at the Financial Ombudsman Service, said in the decision: “I am in agreement that 20Twenty gave Mr R (and others) unsuitable advice when advising him to invest in the scheme and that it misrepresented the scheme to him. I am satisfied that the future potential liabilities of the scheme were not suitable for, or properly explained to Mr R, who would not have signed up to the scheme in my view, if he had realised the true nature of the losses to which it could expose him.”
Martin Taylor, head of client relations at Rebus, added: “The facts of this case are particularly concerning: One of the clients in question was advised that putting money in this scheme was safer than putting it into his mortgage. Another was advised that this would be an ideal vehicle for school fees planning.
“When advisers do not fulfil their regulatory requirements, investors can be led to believe that they are protected by either the income generated by the scheme, or bank guarantees. It is not until the investment fails that they find themselves in a position where they are held liable to significantly more than their initial investment.”
This is the latest in a string of client wins for Rebus, who has successfully claimed back up to £4m for its clients in the last year, and expects to reclaim up to £10m of investor capital by the end of 2013.