FCA gives green light to Concept Capital’s unregulated investment scheme?

Last month I reviewed Concept Capital’s unregulated investment scheme which promises investors 10% per year “guaranteed” for investing in static homes.

Last week Concept Capital got in touch and took issue with various parts of the review. The only part on which they provided any significant new information was the section where I’d discussed the risk that Concept Capital could be viewed by the FCA as an unauthorised investment scheme.

While Concept Capital is an FCA-regulated firm (via What Credit Limited), What Credit (and by extension Concept) is only authorised to offer credit broking and debt counselling and not to run collective investment schemes.

The main requirements of a collective investment scheme is that investors have no day-to-day involvement with the investment, and that investors’ money is pooled to pay their returns. Anyone who runs a collective investment scheme in the UK without authorisation to do so from the Financial Conduct Authority is committing a criminal offence.

If Concept Capital’s investors were paid purely the rent from their individual static home, minus Concept Capital’s management costs, it would be unambiguously a non-collective investment and there’d be no issue.

But that’s not the case. Concept Capital are “guaranteeing” to pay all investors 10% of their investment per year, and moreover to buy back their static home after a minimum of two years at the original investment price. (And it’s a certainty they wouldn’t have as many investors without that guarantee.)

This means that if any investor’s particular static home returns less than 10% after all costs, Concept Capital has to make up the difference.

It has no significant source of funds to do so other than investor money. This means investor’s money is pooled to pay its guaranteed returns, and Concept Capital is running a collective investment scheme.

When I pointed this out to CCG, their response was “the 10% return is derived from a waiting list of tenants who are all pre-approved for a minimum of £125 per week. For clarity and accountability, we have a rent guarantee agreement for all clients with a management company.”

This changes precisely nothing. Those tenants are waiting to rent homes funded by Concept Capital investors. If I use investor’s money to build or buy a static home, that asset is still investor money. If I rent that asset out to a tenant, the income from that asset is still investor money. Section 235 of the Financial Services and Markets Act explicitly says that using profit/income derived from one investor to pay another is pooling.

Nonetheless, I still edited that part of the review, because CCG told me that the Financial Conduct Authority investigated them in November 2020 and have taken no further action.

I requested a comment from the FCA. They declined to provide one, stating that they don’t comment on individual companies. The FCA seem to have overlooked that commercial confidentiality ends where Facebook adverts promoting unregulated investment schemes to the public begin.

But in the absence of any comment from the FCA, I have to take Concept Capital’s word for it that the FCA has given them the green light. Indeed, if the FCA’s review in November had found anything amiss, their normal practice would be to at least publish a warning on their register.

So there you have it. Regardless of whether Concept Capital are running a collective investment scheme or not with an “FCA authorised” kitemark, there appears to be no imminent risk that the FCA pulls its finger out. I am happy to set the record straight.

On a related note, Concept Capital were also keen to stress that “Investors are screened to check they fit the criteria to become an investor for us” [i.e. high net worth or sophisticated, with specific definitions of both].

On that I think we can let their Feefo reviews speak for them. Concept Capital certainly seem to think so, judging by assiduous they are at thanking everyone who leaves a review.

Feefo reviews for Concept CapitalSelected Feefo reviews for Concept Capital.

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