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Asset 1005


If Crowd Investors on Seedrs and Crowdcube cannot be bothered to complain when they are misled and lose their money, why do they bother investing?

The Fianancial Ombudsman Service do not make it easy to complain but complain you must, if you have been misled. Otherwise nothing will change. Here we give you advice on the best way to get your complaint heard.

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There is only one rule that FCA regualted equity crowdfunding platforms must abide by - they must not mislead investors. No one knows what the term 'mislead' means but we are where we are. 

The only instance recorded to date of the FOS finding in favour of an investor against a platform - this time Crowdcube - was in the case of Zing Zing. Here the investor had been told that the capital being raised was to open new units. He invested £18k. No units were opened the company went bust. His intital complaint got the usual Crowdcube nothing to see here response. The FOS as it common, agreed with them. But the investor hadnt given up. He continued to complain and eventually the FOS overturned its own decision and found in his favour. Specifically it found that had the investor known Zing Zing were not going to open new units, he would not have invested. You can read the ruling here https://www.financial-ombudsman.org.uk/decision/DRN7590473.pdf

Over the past 12 years there have been many more egregious examples of the platforms and businesses misleading investors and whilst some complaints have been lodged, none have been resolved in the investors' favour. So its clearly not a level pitch. But it is what it is and unless investors comaplian nothing will ever change. 

To complain you need to have a specific example of why you were misled. It s no good just stating that the company stated it would make £1m profits in year 3 and didnt. As in the case of Zing Zing or more recently Wild Beer Co, it needs to be a listed item in the pitch for which the Company states its raising the cash and which never materialises. Or could be as in the Sugru or Hop Stuff, an example where the company lied in the pitch. You must not not give into the temptation to just say its all unfair - the FOS will just respond that no one made you invest. Caveat Emptor. 

You send your initial complaint to the platform. You will get their standard response. Then you copy both of these and fill out a complaint to the FOS. Be precise. Wait for the FOS standard response - not the platorm's fault. Then esculate the complaint and keep pushing until they agree with you. 

Whilst this will be a frustrating and often pointless exercise - they make it so so you will not bother - surely if we want equity CF to help build sustainable and successful start ups it is worth a little effort on your part? 

We are happy to advise and can be used to create and follow up this procees. For this take a winner's fee only of 10% of the money you receive back. No win no fee. 

Monday February 20, 2023

Hardman and Co’s Brian Moretta in conversation with ECF Buzz Founder Rob Murray Brown on start up investing, equity crowdfunding and what’s a good read.