Another mini-bond provider has gone bust after piling the best part of £36m into a defunct short-term credit lender, sending a catalogue of claims to the compensation scheme.
Basset & Gold and B&G Finance were both placed into administration yesterday (April 1) after the Financial Conduct Authority raised concerns about the viability of the B&G mini-bond scheme.
The firms sold approximately £36m worth of bonds to around 1,800 customers between January 2018 and May 2019.
Basset & Gold, an unregulated firm, issued the bonds while B&G Finance, which is regulated by the FCA, acted as the intermediary between the provider and investors.
The City watchdog flagged issues with the scheme because the money raised was almost entirely invested in Uncle Buck, a now-bust short-term credit lender which entered administration on March 27 after the FCA forced it to stop lending for failing to meet adequate resources requirements.
The Financial Services Compensation Scheme has already determined many investors have a “good prospect” of claiming compensation if they were mis-sold the mini-bond through B&G Finance, adding it was ready to start accepting claims against the firm.
Although Basset & Gold and B&G Finance have both entered administration, the lifeboat scheme is unlikely to pay compensation on claims against Basset & Gold as issuing the bonds is not a regulated activity.
The FCA urged investors not to use claims management companies or third parties to recover their money.
It said: “If you are approached by a company offering to help you recover your money, you should proceed with caution.
“For the vast majority of B&G plc’s bond holders, there will be little or no benefit in involving a third party in making a claim.”
The FCA previously had concerns around the accuracy and fairness of B&G’s financial promotions of the mini-bond scheme, prompting the firm to change tack in January 2019.
Mini-bond promotion has come under increased scrutiny last year following the high-profile collapse of mini-bond provider London Capital & Finance, which fell into administration in January putting the funds of more than 14,000 bondholders at risk.
LCF allegedly signed clients up to fixed-rate Isas promising 8 per cent interest, with investors' capital then invested into mini-bonds used to issue loans to small businesses.
In November, the FCA introduced a temporary ban on the marketing of mini-bonds to retail investors which came into force for a year on January 1.
Paul Boyle, David Clements and Anthony Murphy — insolvency practitioners at Harrisons Business Recovery and Insolvency — have been appointed as administrators of Basset & Gold and B&G Finance. They will now assess the firms’ assets and put forward proposals as to how they will proceed within eight weeks.
imogen.tew@ft.com
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