Financial losses caused by investments into Basset & Gold Plc “mini-bonds”

Many people are facing the prospect of losing significant amounts of money, having invested in Basset & Gold Plc “mini-bonds”.

The background

A mini-bond is an unlisted debt security, typically issued by a small business in order to raise funds. For an investor, the attraction of an investment in a mini-bond is usually a fixed rate of interest over a set investment term. At the end of the term, the investors’ capital is due to be repaid.

Mini-bonds can be appealing to investors because of the interest rates on offer, but they are usually illiquid and are not transferable. The return on an investor’s money entirely depends on the success and proper running of the issuer’s business.

Who are Basset & Gold Plc?

Basset & Gold Plc (B&G) was an issuer of mini-bonds. As West Ham United’s shirt sleeve sponsor, the firm was heavily advertised at the football club’s London Stadium and via its social media channels.

B&G sold mini-bonds to an estimated 1,800 investors between 2015 and 2019. It is estimated that approximately £36m was invested through the purchase of B&G mini-bonds, and it is understood that B&G were offering a return of 8% in many cases.

What went wrong?

However, it later transpired that, often without the knowledge of the investors, a significant proportion of the funds that B&G raised by issuing its mini-bonds was then invested solely into a high-cost short-term credit lender named Uncle Buck Finance LLP (Uncle Buck).

Uncle Buck entered into administration on 27 March 2020 and, if that business ultimately fails, investors may get nothing back.

B&G Finance Limited

Importantly, B&G itself was not regulated by the Financial Conduct Authority (FCA).

Issuing mini-bonds is not normally a regulated activity; however, from January 2018 onwards, B&G often worked alongside a partner, a regulated firm named B&G Finance Ltd (B&G Finance).

Typically, B&G Finance acted as a ‘middle-man’ between B&G and investors, arranging investments in the bonds sold by B&G. Because B&G Finance was (and still is) FCA authorised, B&G Finance was able to approve and communicate financial promotions relating to B&G’s mini-bonds; these investments were often then placed within an ISA wrapper.

FCA concerns and interventions

Historically, the FCA had concerns around the accuracy and fairness of B&G’s financial promotions of the mini-bonds. For example, not all investors were told were their money was going to be invested in Uncle Buck or were misled into believing that their money would be safe and secure.

As a result, B&G Finance made improvements to its advertising in December 2018 and also wrote to all bondholders in January 2019 to clarify that B&G has used

“The vast majority of Bond proceeds to finance a large facility agreement with an FCA-regulated short-term consumer lender”.

Naturally, this fact began to concern investors. No further bonds were issued to investors from May 2019 onwards.

For many investors, the interest rates and returns promised by them have simply not materialised. In reality, the mini-bonds were always high-risk investments.

In January 2020, the FCA introduced rules to ban the promotion of what it calls ‘speculative mini-bonds’ to retail consumers, unless the investor is considered to be ‘sophisticated’ or have a high net worth.

Pursuing a claim

Shortly after Uncle Buck entered into administration, B&G and B&G Finance also entered into administration on 1 April 2020.

There has been plenty of publicity surrounding these events. The national press have run stories detailing the unfortunate circumstances of investors who have lost their savings due to investments into mini-bonds sold by B&G.

Problems have arisen because the issuing of mini-bonds is not ordinarily a regulated activity. Firms are only required to be authorised by the FCA if they undertake certain regulated activities, such as providing investment advice or arranging investments for individual investors.

Because the issuing of the mini-bonds did not involve a regulated activity, B&G did not need to be authorised in order to issue the mini-bonds, but B&G Finance did need to be authorised to arrange the investments surrounding the mini-bonds.

Consequently, the Financial Services Compensation Scheme (FSCS) has confirmed that investors may be eligible to claim at the FSCS. The FSCS has determined that due to mis-selling of the mini-bonds, B&G bondholders who bought their mini-bonds through B&G Finance might be able to claim compensation if they relied on a misleading statement, for example.

What are the options?

If you invested in a B&G mini-bond directly through B&G, there may be other options to make a claim for compensation to recover your losses.

For example, if you received advice from B&G to disinvest from another investment in order to invest in a mini-bond, then this could be interpreted as a regulated activity, and you may be eligible to claim at the FSCS.

In addition, B&G was previously an appointed representative of another regulated firm named Gallium Fund Solutions Limited (“Gallium”). If you were sold mini-bonds between 1 February 2017 and 28 February 2018 (which may have then been placed within an innovative finance ISA), you could have grounds for a claim against Gallium.

If you are affected, then we would like to hear from you, as we may be able to assist you in bringing a No Win, No Fee claim to recover your losses. Please get in touch with us for free, non-obligation advice, and one of our solicitors will call you back at a convenient time.