Gallium Fund Solutions Limited - Basset & Gold “mini-bonds” Claims

Gallium Fund Solutions Limited and financial losses caused by investments into Basset & Gold “mini-bonds.”

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

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 investors’ money entirely depends on the success and proper running of the issuer’s business.

Basset & Gold 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 such mini-bonds, and it is understood that Basset & Gold were offering a return of 8% in many cases.

However, it later transpired that, often without the knowledge of the investors, a significant proportion of the funds that Basset & Gold raised by issuing its mini-bonds were actually invested solely into a high-cost short-term credit lender named Uncle Buck Finance LLP (Uncle Buck). Individuals involved in Uncle Buck were also connected to Basset & Gold.

Uncle Buck entered into administration on 27 March 2020. As a direct result, Basset & Gold was placed into administration on 1 April 2020 and investors feared the possibility they would lose all of their invested funds.

On 20 October 2020, the Financial Services Compensation Scheme (FSCS) declared Basset & Gold ‘in default’. This means that some investors now have recourse to the FSCS and can seek compensation from the statutory fund of last resort. We have successfully represented several of these investors at the FSCS.

However, not all investments in Basset & Gold mini-bonds are covered by the FSCS. Typically, the FSCS will only pay compensation if an investor purchased a Basset & Gold mini-bond on or after 1 March 2018. Prior to 1 March 2018, Basset & Gold was an appointed representative of a Financial Conduct Authority (FCA)-regulated firm named Gallium Fund Solutions Limited (Gallium), and investors’ claims at the FSCS have been rejected on the grounds that the investor has to complain to Gallium instead.

Basset & Gold used Gallium to approve the issuing of its financial promotions relating to its mini-bonds until February 2018.

These ‘Invitation Documents’ were often shown to investors prior to the sale of the mini-bonds and were used as a tool to persuade them to invest. We understand that they were also available on the Basset & Gold website.

A FCA publication first issued on 26 November 2019 called “Approving financial promotions” contains useful guidance as to what is expected of a regulated firm when it approves a financial promotion:

“You should therefore analyse, and carry out due diligence regarding, the substance of a promotion before approving its content for communication by an unauthorised person…When assessing whether a promotion is fair, clear and not misleading, a firm may need to consider (among other things):

• The authenticity of the proposition described in the relevant promotion. This may mean undertaking background checks on directors, controllers or other key individuals associated with the product provider.
• The commercial viability of the proposition described in the promotion. Has the promotion adequately disclosed any significant factors that could threaten the product’s viability?
• Could potential investors make an informed decision about investment?
• Whether advertised or headline rates of return are reasonably capable of being achieved. This may mean reviewing materials such as the product provider’s financial statements and/or management accounts, business plan, financial projections and capital position.
• Whether there are any fees, commissions or other charges within the investment’s structure or elsewhere that could materially affect the ability of the product provider to deliver advertised or headline rates of return.
• If the product is advertised as being eligible for a particular tax treatment (e.g. for inclusion within an Innovative Finance ISA), does the product actually meet the requirements for this treatment?”

On 1 April 2020, the FCA issued a further statement about Basset & Gold, which said:

“We had concerns around the accuracy and fairness of Basset & Gold plc’s financial promotions of the mini bonds. As a result, B&G Finance made improvements to its advertising in December 2018 and wrote to all bondholders in January 2019 clarifying that Basset & Gold has used ‘the vast majority of Bond proceeds to finance a large facility agreement with an FCA-regulated short-term consumer lender”.

What are your options?

If you were sold a Basset & Gold mini-bond 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.

You may have already had a claim against Basset & Gold rejected by the FSCS and given up?

If so, please contact us, as we may still be able to help. We are currently acting for several individuals who are pursuing Gallium as a result of its role in the sale of their mini-bonds.

We are bringing clients together in a collective claim and would like to hear from you as soon as possible if you have been affected, as time limits apply.

Please get in touch with us for free, non-obligation advice, and one of our solicitors will call you back at a convenient time.