FCA Censures Blue Gate, Orders Firm to Pay Connaught Investors £203k

The FCA has publicly censured fund operator Blue Gate Capital Limited and ordered it to pay £203,007 in restitution to investors who lost money in the Connaught Income Fund, Series 1.

December 18, 2020 | AtoZ MarketsBritain’s Financial Conduct Authority (FCA) on Friday ordered Blue Gate Capital Limited to pay over £200,000 in compensation to investors who lost money investing in the Connaught Income Fund.

Blue Gate censured for breaching FCA's Principles for Business

The City regulator said it had censured Blue Gate and told the firm to pay £203,007 in restitution to investors in the fund, which is currently in liquidation, via the FCA.

Blue Gate was found to have breached Principle 2 and 7 of the FCA's Principles for Business, the FCA said.

Principle 2 was breached by Blue Gate failing to conduct adequate due diligence on the Connaught fund prior to taking it on; failing to investigate potentially serious issues with the fund of which it was aware; and failing, throughout its tenure as operator, to establish that the fund was operating as it was supposed to.

Principle 7 was breached due to Blue Gate failing to communicate with the Fund's investors in a way that was clear, fair and not misleading.

The FCA said it would have imposed a fine of £10m for these failings, had Blue Gate not established it was in serious financial hardship.

The £203,007 reflects the profits earned by Blue Gate as operator of the fund, which is had acted as from 25 September 2009 until the fund was compulsorily liquidated on 3 December 2012.

The FCA's executive director of enforcement and market oversight Mark Steward said FCA-authorised fund operators were "expected to undertake sufficient due diligence on the funds they operate".

"In this case, significant and serious deficiencies existed in the fund at the time Blue Gate became operator of the fund and these deficiencies left investors exposed and unprotected," Steward added.

"In total, the FCA's actions in response to the failure of the fund have led to investors receiving back, in net terms, the value of their investment in the fund."

FCA to distribute £203k to Connaught investors

The FCA said it would receive the compensation from Blue Gate and distribute it to investors themselves, with investors not needing to take any action at this time.

On Thursday, December 18, the FCA said it would overhaul its processes and procedures following the publication of independent reports into its handling of the Connaught and London Capital & Finance fund scandals.

Further, reports revealed two FCA executives were coming under pressure to hand back bonuses totaling £90,000 awarded to them for the 2018-19 financial year.

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