NG claims and why you should submit them (TC)
May 17, 2021 9:17:37 GMT
oliveau, Ton ⓉⓞⓃ, and 5 more like this
Post by pikestaff on May 17, 2021 9:17:37 GMT
BLN going into administration appears to have been precipitated by claims being upheld by the FOS with regard to the NG portfolio. As of now there are four. You can find them at www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions - search on Business Loan Network. I doubt that there will be more, because the FOS is no longer interested once a company falls into administration. However, I think the fact that the FOS has upheld claims is good news for all lenders in a similar position.
Lenders may recall the case of London Capital & Finance (LCF), which failed a few years ago leaving investors in its unregulated (and essentially fraudulent) mini-bonds seriously out of pocket. Mini-bonds, like p2p, are outside the scope of the FSCS. However, LCF was regulated as an adviser. Any investors able to provide evidence that they had been advised by LCF to invest in the minibonds were able to claim under the FSCS, because the advice was regulated and it was misleading. Investors were not required to prove that they had relied upon the advice, merely that they had received it.
The majority of LCF investors could not provide such evidence, and their claims were rejected. They challenged the decision in court and lost, but are now being compensated by the government because of serious failings by the FCA. This should not have any bearing on our position, because BLN/TC was (and is still) regulated with regard to its p2p platform.
The FOS rulings on the NG claims detail a number of shortcomings, the main one being that the IPs were misleading and BLN/TC had failed to make reasonable checks to ensure that they were not. Below is an extract from one of the rulings (DRN6738447):
It was open to ThinCats to present the information provided from the sponsor to investors for
their consideration and it’s fair to say that as no advice was being given, it was for each
investor to decide whether or to the investment was suitable for them. But it was for
ThinCats to undertake due diligence checks on the promotional information to be satisfied
that the information being presented on its platform was clear, fair and not misleading, to
enable investors to make an informed decision. ThinCats repeatedly says the due diligence
checks were down to the investor, but this evidences a fundamental misunderstanding of its
responsibilities. [...]
In the light of the LCF precedent, I think it follows that not only those NG lenders whose claims have been upheld by the FOS, but also all other lenders in a similar position, should be entitled to claim under the FSCS for their losses, subject to two caveats:
(1) to what extent the FSCS agrees with the FOS's position on liability, and
(2) what proof the FSCS might require.
BLN has minimal assets, so its creditors will get nothing from the administration. If BLN has no insurance, that is equally true of any claims that are upheld. But it is still important to submit a claim, because any valid claim against BLN that is unpaid should (subject to the caveats above) create a claim against the FSCS.
I now find myself hoping that BLN has not got insurance, because an insurer would probably require BLN to fight claims tooth and nail. But if there is no insurance, it seems to me that the only parties with skin in the game will be the NG lenders and the FSCS.
Depending on how the FSCS wants to play this, it could simply be accepted that all lender claims similar to those already ruled on by the FOS are valid. If there is no insurance I can see no obvious reason why the administrators would not agree to this if so directed. They might need it to be confirmed by a short and relatively cheap application to the court.
However if the FSCS (or the insurers, if any) wants the administrators to argue the toss we could be in for an expensive court action where lenders collectively sue BLN and the administrators. That's not a course that I would care to pursue without prior assurance that any claims accepted would indeed be covered by the FSCS.
Somewhere in between the two, it might be possible for lenders collectively to negotiate an agreed position with the FSCS (perhaps through the FCA, which will be attending creditors' committee meetings as an observer), which the administrators could then be directed to follow.
All that, however, is for the future. The first thing to do is submit a claim.
Unfortunately my analysis was mistaken. What I missed was that the FSCS will pay compensation only for losses only where the regulated activity is within its scope. Advice (the basis of the payout in LCF) is within its scope. Operating a p2p platform is not. So there is, with regret, no prospect of a payout by the FSCS. I still think it's worth raising a claim against BLN, though.
See also p2pindependentforum.com/post/435373/thread
Lenders may recall the case of London Capital & Finance (LCF), which failed a few years ago leaving investors in its unregulated (and essentially fraudulent) mini-bonds seriously out of pocket. Mini-bonds, like p2p, are outside the scope of the FSCS. However, LCF was regulated as an adviser. Any investors able to provide evidence that they had been advised by LCF to invest in the minibonds were able to claim under the FSCS, because the advice was regulated and it was misleading. Investors were not required to prove that they had relied upon the advice, merely that they had received it.
The majority of LCF investors could not provide such evidence, and their claims were rejected. They challenged the decision in court and lost, but are now being compensated by the government because of serious failings by the FCA. This should not have any bearing on our position, because BLN/TC was (and is still) regulated with regard to its p2p platform.
The FOS rulings on the NG claims detail a number of shortcomings, the main one being that the IPs were misleading and BLN/TC had failed to make reasonable checks to ensure that they were not. Below is an extract from one of the rulings (DRN6738447):
It was open to ThinCats to present the information provided from the sponsor to investors for
their consideration and it’s fair to say that as no advice was being given, it was for each
investor to decide whether or to the investment was suitable for them. But it was for
ThinCats to undertake due diligence checks on the promotional information to be satisfied
that the information being presented on its platform was clear, fair and not misleading, to
enable investors to make an informed decision. ThinCats repeatedly says the due diligence
checks were down to the investor, but this evidences a fundamental misunderstanding of its
responsibilities. [...]
In the light of the LCF precedent, I think it follows that not only those NG lenders whose claims have been upheld by the FOS, but also all other lenders in a similar position, should be entitled to claim under the FSCS for their losses, subject to two caveats:
(1) to what extent the FSCS agrees with the FOS's position on liability, and
(2) what proof the FSCS might require.
BLN has minimal assets, so its creditors will get nothing from the administration. If BLN has no insurance, that is equally true of any claims that are upheld. But it is still important to submit a claim, because any valid claim against BLN that is unpaid should (subject to the caveats above) create a claim against the FSCS.
I now find myself hoping that BLN has not got insurance, because an insurer would probably require BLN to fight claims tooth and nail. But if there is no insurance, it seems to me that the only parties with skin in the game will be the NG lenders and the FSCS.
Depending on how the FSCS wants to play this, it could simply be accepted that all lender claims similar to those already ruled on by the FOS are valid. If there is no insurance I can see no obvious reason why the administrators would not agree to this if so directed. They might need it to be confirmed by a short and relatively cheap application to the court.
However if the FSCS (or the insurers, if any) wants the administrators to argue the toss we could be in for an expensive court action where lenders collectively sue BLN and the administrators. That's not a course that I would care to pursue without prior assurance that any claims accepted would indeed be covered by the FSCS.
Somewhere in between the two, it might be possible for lenders collectively to negotiate an agreed position with the FSCS (perhaps through the FCA, which will be attending creditors' committee meetings as an observer), which the administrators could then be directed to follow.
All that, however, is for the future. The first thing to do is submit a claim.
Unfortunately my analysis was mistaken. What I missed was that the FSCS will pay compensation only for losses only where the regulated activity is within its scope. Advice (the basis of the payout in LCF) is within its scope. Operating a p2p platform is not. So there is, with regret, no prospect of a payout by the FSCS. I still think it's worth raising a claim against BLN, though.
See also p2pindependentforum.com/post/435373/thread
