The Financial Conduct Authority has censured failed investment firm Equity for Growth (Securities) Limited (EFG) for approving financial promotions for mini-bonds that were “unfair, unclear and misleading.”
The FCA said it decided not to impose a financial penalty because the firm is insolvent and being wound up and any penalty would reduce funds available to repay creditors.
The watchdog said that if it had imposed a financial penalty it would have been £386,467.
Mini-bonds are a type of investment product often used by firms to promote supposedly high or guaranteed returns to investors but many have been linked to failed firms.
The regulator said that EFG approved financial promotions which failed to disclose very high commission fees charged by its appointed representatives and other introducers for marketing the mini-bonds to investors.
EFG acted as principal (regulated host firm) for a number of appointed representatives.
EFG was the host firm or principal for five appointed representatives between October 2015 and June 2020. During this period, EFG’s business activities were mainly undertaken through its appointed representatives. EFG’s appointed representatives included Osborne Baldwin Ltd, trading as Hunter Jones, (May 2018 to April 2020) and Amyma Limited (July 2018 to September 2019).
EFG appears to have had connections to firms claiming to offer green investments, including renewable energy, ‘green’ buildings and ‘new coal solutions.’
The FCA said that the firm’s promotions failed to state that high fees would be deducted from investors’ money. This meant the investors could not make a fully informed decision before investing.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “Investors cannot make informed decisions without key information. Firms must make sure that the financial promotions they are approving are transparent about the high commissions taken from people’s money and the impact those charges have on their investments.”
On 25 March, following an FCA petition and restrictions to prevent the firm from conducting regulated activities, the High Court ordered EFG to be wound up on the basis that it was insolvent.
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