The UK's Financial Conduct Authority publicly censured Blue Gate Capital in December and ordered it to pay £203,007 in restitution to investors who lost money investing in the Connaught Income Fund, Series 1, which Blue Gate operated. It has now gone into liquidation.
Blue Gate had until 8 January to pay the amount of restitution to the FCA for onward distribution to investors. The FCA subsequently issued a statutory demand for payment.
Blue Gate’s shareholders then took the decision to place the business in insolvent liquidation by means of a "creditor's voluntary liquidation."
Jason Mark Elliott and Craig Johns of Cowgill Holloway Business Recovery LLP were appointed Joint Liquidators on 1 March. The FCA intends to make a claim in the liquidation, as a creditor, for the amount of restitution.
The Connaught Fund was an unregulated collective investment scheme (UCIS) which commenced operation in March 2008, providing short-term bridging finance to commercial operators in the UK's property market.
Blue Gate took over as operator of the fund from Capita Financial Managers Ltd (CFM) on 25 September 2009 and remained as operator until the fund’s compulsory liquidation on 3 December 2012. In 2017 the FCA fined Capita £66 million for its part in the fund’s demise and loss to investors.
The FCA found, and Blue Gate agreed, that it had flouted Principle 2 of the FCA’s Principles for Businesses because it failed to conduct adequate due diligence on the fund prior to taking it on, failed to investigate potentially serious issues with the Fund of which it was aware and failed, throughout its tenure as operator, to establish that the fund was operating as it was supposed to.
The FCA also found, and Blue Gate agreed, that it had contravened Principle 7 because it failed to communicate with the fund’s investors in a way that was clear, fair and not misleading.
These failings would have resulted in the imposition of a penalty of £10 million, had Blue Gate not proved to the FCA that it was in serious financial hardship.