When the FCA issued a statutory demand for payment, Blue Gate’s shareholder decided to place the business into insolvent liquidation via a creditors voluntary liquidation.
Blue Gate appointed Cowgill Holloway Business Recovery as the liquidator yesterday.
The FCA said it will make a claim in the liquidation, as a creditor, for the full £203,007.
The Connaught Income Fund, also known as the Guaranteed Low Risk Income Fund Series 1, went into administration in 2012 and cost investors £100m in losses.
In December, a critical report was released about the FCA’s role in regulating Connaught with the regulator accepting it had “lessons to learn.”
The fund was an unregulated collective investment scheme (UCIS). It began operating in March 2008 and provided short term bridging finance to companies involved in the UK property market.
Blue Gate took over as operator of the fund from Capita Financial Managers Limited (CFM) on 25 September 2009 and remained operator until the fund’s compulsory liquidation on 3 December 2012.
As a result of FCA action against CFM in 2017, CFM agreed to pay up to £66m for the benefit of investors.
The FCA found, and Blue Gate agreed, that it breached Principle 2 of the FCA’s Principles for Businesses. It failed to conduct “adequate due diligence” on the fund prior to taking it on, failed to investigate potentially serious issues with the fund and failed to establish that the fund was operating as it was supposed to.
The FCA also found, and Blue Gate agreed, that it breached Principle 7 of the Principles because it failed to communicate with the fund’s investors in a way that was clear, fair and not misleading.
The FCA said these failings would have resulted in a penalty of £10m if Blue Gate had not established it was in serious financial hardship.
The restitution of £203,007 to the investors reflects the profits earned by Blue Gate as operator of the Fund.