Collapsed litigation funder named in FCA warning on loan-note scams

Collapsed litigation funder Woodville, which went into administration in July, receives a name-check in the Financial Conduct Authority's latest alert on investment scams. 

In a warning today on loan notes and mini-bonds issued by unregulated companies, the FCA states that 'the recent failure of Woodville Consultants Ltd, a litigation funder that raised capital from retail investors through unregulated loan notes, shows the potential risk to investors'.

A loan note or mini-bond usually involves lending money to a company for a set period in return for interest, the notice states. 'If that company fails, consumers could lose every penny.' Investors in Woodville are currently awaiting an update from adminstrators Kroll. Another business controlled by the same individuals and operating from the same address, Horizon Legal Group Limited, went into administration earlier in the month. 

The marketing of speculative illiquid securities including mini-bonds and loan notes, to retail investors has been banned since 1 January 2021. However promoters can circumvent this ban by requiring investors to certify themselves online as experienced or high net-worth investors.

The FCA warns investors to be wary of isocial media or online advertisements promoting high fixed returns. 'Warning signs include pressure to act quickly, unclear explanations of how money could be lost, or claims that an investment is “asset-backed” without clear evidence of what stands behind it.'  

Lucy Castledine, director of consumer investments at the FCA, said:    'Big, fixed returns are a warning sign, not a guarantee. Loan notes, mini-bonds and other speculative illiquid securities are high-risk investments and are not suitable for most people. 

'Ordinary retail investors should only invest through regulated firms because if they invest through an unauthorised firm, they may have little or no protection if things go wrong. We are working hard to prevent harm, but consumers should still stop and check before investing.'

The FCA encourages anyone involved in distributing or funding high-risk investments to report anything suspicious. This includes regulated firms, banks, payment firms, lawyers, accountants and auditors who may be involved in getting these investments to consumers.