UK Financial Services Compensation Scheme ready to start accepting claims against B&G Finance

FSCS is aware that B&G Finance Ltd entered administration on April 1, 2020.

The UK Financial Services Compensation Scheme (FSCS) is aware that B&G Finance Ltd entered administration on April 1, 2020. The Scheme says it is ready to start accepting claims against the firm.

From January 2, 2018, B&G Finance Ltd arranged and promoted mini-bonds on behalf of Basset & Gold Plc, which issued the mini-bonds. FSCS has determined that due to mis-selling of these mini-bonds, many Basset & Gold bondholders who bought their mini-bonds through B&G Finance Ltd may be able to claim compensation up to the £85,000 limit.

Although Basset & Gold Plc has also entered administration, FSCS is unlikely to be able to pay compensation based purely on Basset & Gold Plc’s failure to repay the bonds, as issuing bonds is not normally a regulated activity.

Customers who bought their bonds through B&G Finance Ltd can submit a claim directly to FSCS.

For FSCS to be able to pay compensation, the customer must have been mis-sold their bonds, for example, because they relied on a misleading statement about how Basset & Gold Plc was investing their money. FSCS will also check which firm was responsible for the sale of the bonds.

FSCS is investigating possible mis-selling of the mini-bonds by other related firms prior to January 2, 2018.

Regarding a similar case – that of London Capital & Finance where FSCS could not protect all investors, the body explains that, under FSCS’s rules – the COMP rules – FSCS can pay compensation only where a regulated firm owes a customer a civil liability in connection with a regulated activity. This means the firm is liable for the customer’s financial loss.

LCF was issuing its own mini-bonds, which is generally not a regulated activity. So, although customers may be owed a civil liability by LCF, this will not generally be in connection with a regulated activity that FSCS could compensate for. Only where LCF strayed into carrying out a regulated activity, such as advising, the Scheme will be able to compensate customers.

In contrast, B&G Finance Ltd carried out regulated activities in relation to the mini-bonds on behalf of the bond issuer, Basset & Gold Plc. If the firm that carried out the regulated activity owes a civil liability to a customer (e.g. resulting from misrepresentations about the mini-bonds), then FSCS may be able to compensate.

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