The FCA has publicly apologised to clients of two failed mini-bond firms for the way it dealt with their complaints about the firms and will pay compensation.

The regulator upheld complaints about its handling of mini-bond providers Basset & Gold plc and Basset & Gold Ltd, both based in the City of London.

The firms were at one point the shirt-sleeve sponsor of West Ham United.

The watchdog admitted today after a lengthy investigation that there were “failures” in the way it dealt with the firms although it has rejected calls for substantial redress. 

The FCA says it will not accept losses for redress as it was not the direct cause of investor losses but said it would pay £200 to each complainant, “in recognition of how long it took to respond to the complaints.”

Both of the failed firms were unregulated businesses that raised funds by issuing mini-bonds, acting as appointed reps for other firms.

Although the firms were appointed representatives on the Financial Services Register, the FCA says it did not directly regulate or approve the registration of the companies.

Basset & Gold Ltd went out of business in 2021 and Basset & Gold plc in 2022.  

Basset & Gold plc and Basset & Gold Ltd were appointed representatives of three regulated firms: Thornbridge Investment Management LLP, Gallium Fund Solutions Ltd and B&G Finance Ltd.

The three regulated firms acted as principals and were responsible for their appointed representatives’ conduct, including the approval of the financial promotions for the mini-bonds at different times, the FCA said. 

Complainants raised a number of issues about the FCA’s actions, including the authorisation and supervision of the firms.

After a probe, the FCA said it had “carefully considered the complaints” and decided to uphold complaints about its own failings over its authorisation of B&G Finance Ltd and its supervision of Basset & Gold plc, Basset & Gold Ltd and B&G Finance Ltd.

The regulator said it had not upheld complaints specifically about the authorisation of Basset & Gold plc and Basset & Gold Ltd or accusations that it failed to stop the sale of Basset & Gold plc mini-bonds at an earlier time or a failure to act on a specific warning about Basset & Gold plc.

The FCA said in a statement today: “We accept that we failed to consider all the information we had about B&G Finance Ltd and its related companies in the round. This meant issues were addressed individually rather than collectively, which may have changed our engagement with the firms.

“However, we do not believe that the missed opportunities would have altered the outcome of our interactions with the firms or ultimately prevented Basset & Gold plc’s failure. Given we were not the direct cause of the investor losses which were caused by the failure of Basset & Gold plc and related entities, we will not pay any redress for failures, but have apologised to complainants for our historic failures.”  

According to the Daily Mail's This is Money service in 2021, Basset & Gold, which sponsored the shirt sleeves of West Ham United, left 1,800 investors £35million out of pocket. Concerns were raised about the firm's advertising with rates touted at 4.24%. Investors were told money would be used to back small businesses, but almost all of it went to a payday loan firm called Uncle Buck which later failed.

The FCA said issuing mini-bonds is not a regulated activity. In January 2021, the watchdog, however, banned the promotion of mini-bonds to consumers, unless they were sophisticated or had a high net worth. In February 2023, the FCA introduced new rules to raise standards for firms promoting high-risk investments and approving financial promotions. Since February 2024, all authorised firms that want to approve financial promotions for unauthorised firms must apply to the FCA for specific ‘approver permission.’

There have been a string of failures of mini-bond firms in recent years, including the notorious collapse of London Capital & Finance. The mini-bond provider failed in 2019 leaving 11,000 investors with combined losses of over £237m. The company had advertised the mini-bonds as ISA compatible when this was not the case.

The FCA has been stung by criticism in the past that it failed to regulate the mini-bond sector properly.

The Financial Services Compensation Scheme declared Basset & Gold plc as failed in 2020 after it went into administration and has compensated many ex-customers up to its £85,000 per case limit.