Two UK firms, Basset and Gold (B&G) and B&G Finance, entered administration on 1 April, with Harrison Business Recovery & Insolvency appointed to look after the process.
B&G issued bonds that were sold to retail consumers, but it was not authorised by the Financial Conduct Authority as issuing mini-bonds is “not normally a regulated activity”, the watchdog said.
B&G Finance, which is regulated by the FCA, acted as an intermediary between B&G and investors.
Around 1,800 customers invested £36m ($44.6m, €40.7m) in the mini-bonds, which promised returns ranging between 4.32% and 9.01%.
The company was one of the sponsors for British football club West Ham.
What about compensation?
The administrators will assess the firm’s assets and put forward proposals as to how they will proceed with the administration.
They will write to bondholders with their proposals usually within eight weeks of appointment, the FCA stated.
This will include the process of how to make a claim.
“The FSCS anticipates it may start to receive claims from investors against B&G Finance and has determined that many investors have a good prospect of claiming compensation,” the joint administrators said.
Where was the regulator?
The FCA admitted that it “had concerns around the accuracy and fairness of B&G 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 B&G has used ‘the vast majority of bond proceeds to finance a large facility agreement with an FCA-regulated short-term consumer lender [Uncle Buck]’.
The last round was issued in May 2019 and B&G scaled back its UK operations in November; following the mini-bond scandal that stemmed from the collapse of London Capital & Finance, which saw over 11,600 retail investors losing approximately £237m.
According to the watchdog, B&G and B&G Finance took independent solvency advice after the FCA raised concerns about the viability of the mini bond scheme after Uncle Buck entered administration on 27 March.
The directors subsequently concluded that both firms were insolvent.
