Investments  

Due diligence vitalin crowdfund investments, say lawyers

Due diligence vitalin crowdfund investments, say lawyers

A law firm has warned that due diligence on crowdfunding is crucial in the wake of the collapse of claims management company Rebus.

The Rebus Group, which targeted individuals who were mis-sold financial products, filed for administration earlier this month.

Rebus had raised more than £816,000 through crowdfunding platform Crowdcube last year, with around 100 individuals investing between £5,000 and £135,000.

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Law firm Moore Blatch warned that due diligence on crowdfunding should not just be limited to investors, and advised those clients who use a claims handling firm to undertake similar checks.

Mark Osgood, partner at Moore Blatch, said Rebus clients – made up mostly of private businesses and high net-worth investors – stand to lose about £1bn if they do not act swiftly.

A notice on Rebus’s website said 1,700 clients could lose a total of £930m. This notice has since been removed.

Mr Osgood said that on average, Rebus customers typically stood to lose £100,000 if their cases missed the six-year limitation cut off, meaning the implications of the company entering administration could be “just as grave” for its clients.

The legal firm has set up a triage service for former Rebus clients whose claims risk missing the six-year limitation period for qualification.

Earlier this month, the Financial Ombudsman Service (Fos) revealed that nearly a fifth of all the complaints it received about advisers were done through a claims management company.

Adviser view

Alan Lakey, director of CIExpert, said: “I assume the loss relates to either fees paid up-front (if that is how they did business) or compensation filtered through Rebus that never made it to the clients.

“It highlights yet again the futility of using a claims management company when escalating a complaint direct to the Financial Ombudsman Service.

“If Rebus has retained client funds of some description then it is quite appropriate for this to be promulgated to a wider audience to ensure that consumers think twice before responding to the sweet voices of the claimsmongers.”

katherine.denham@ft.com