I have just had this official reply from the FCA regarding the template letter of complaint on this forum and it appears we have been sold down the river by Graham Wellesley and his similarly named unregulated companies hiding behind his FCA regulated parent company -
Thank you for contacting the Financial Conduct Authority (FCA) via email.
I understand that you’re contacting us in relation to Wellesley Group and Wellesley Finance Plc's proposal to enter into a Company Voluntary Agreement (CVA). I appreciate that this must be a worrying time for you and your concerns have been raised to the relevant departments for their attention.
What does Wellesley do?
I thought it would be helpful to provide you with some background on the Wellesley Group which may provide useful context to our responses to the questions that you have asked of us. The Wellesley Group and its individual companies trade under the generic name “Wellesley”. Wellesley is an alternative financier, providing secured loan finance to commercial borrowers in the UK residential property market. Lending activities were undertaken by Wellesley Finance Plc (WFP) which financed its activities through peer-to-peer (P2P) investments, unregulated Wellesley Finance Plc mini bonds and the securitisation of loans to an affiliated company Wellesley Secured Finance Plc (WSFP). WSFP funded its acquisition of securitised loans by issuing bonds on Euronext - Dublin, formerly the Irish Stock Exchange.
Only Wellesley & Co Limited (WCL) is an authorised firm. Originally regulated by the Office of Fair Trading to provide a platform for Peer to Peer investors, the firm was granted interim consumer credit permissions on 01/4/2014 when the regulation of consumer credit activity transferred to the FCA. It became directly authorised by the FCA in February 2019 when it was granted permissions to promote and arrange investments from retail customers into the WSFP listed bonds, hold and safeguard client money and manage the winddown, under limited permission, of the Group’s existing peer-to-peer investments.
Addressing your questions
You have some specific questions of the FCA and I’ve tried as far as possible to respond to these below for you.
Is/Was the loanbook sale to Cloverleaf legal, challengeable and reversible?
WFP, which is the entity involved in the sale is unregulated – If investors consider the sale may illegal they may wish to take independent advice on potential next steps and if appropriate raise their concerns with the firm and/or the court at which the CVA is filed.
If Wellesley is put into administration does it mean that it now only has deferred assets of £50 million rather than the £100 million it had before 'in-house' sale in 1?
We can't comment on the financial position of an unregulated firm. Information on the historical financial position of Wellesley Group entities is publicly available at Companies House and free to access on the Companies House website.
A CVA is a rescue process governed by Insolvency legislation and should provide a better return to its creditors than an insolvency if it is successful. In a CVA, a company proposes an agreement to repay part or all the money it owes to its creditors over a certain period. The CVA should contain sufficient information to allow creditors to assess if the CVA is likely to be better for them than an insolvency of the company. However, there is no guarantee that the creditors will receive the outcome outlined in the proposed CVA.
The Directors must by law give creditors sufficient information to vote on the proposal and the nominee who must be an Insolvency Practitioner must report on whether the CVA has a reasonable prospect of being implemented and whether the proposal should be considered by the creditors. The CVA proposal should include sufficient information to enable creditors to understand the company’s financial and trading history, the roles that the directors and key employees played and their future involvement in the company.
If you consider the information provided is insufficient you should seek clarity from the Nominee of the CVA – Duff and Phelps.
Can Wellesley be forced to retract or suspend the current CVA vote [expiring 13.10.20] whilst FCA investigates?
The CVA proposed is in respect of WFP, which as explained above is not regulated by the FCA. This means that we have no power under section356 of FSMA to challenge the approval of the CVA at court on the grounds of unfair prejudice, a material irregularity or a false representation by directors.
If a creditor does not feel a CVA is the best option for them and is a creditor of Wellesley Finance PLC they can vote against the CVA. If after 14 days the CVA is approved by the required number of creditors, creditors may be able to challenge the approval of the CVA. The CVA documentation sets out who can and how to object. A challenge must be lodged with the court where the CVA was filed, on the grounds that it is unfairly prejudicial to the creditor or there have been material irregularities in the process and they must seek an order within 28 days of its approval from the court to revoke or suspend the decision to approve the CVA.
If Wellesley clients vote for the CVA, and it gets passed, does that mean that they give up any legal re-dress against Wellesley and its Directors?
Once approved, a CVA is binding on the company, in this case, WFP and all of its unsecured creditors, including those who voted against the proposal and those who did not vote. A CVA is monitored by a Supervisor, who is a licensed insolvency practitioner (IP) and who is the Nominee of the CVA prior to its approval.
As we did not authorise any of the Wellesley companies that issued the bonds (WFP and WSFP). Investors will not be able to complain to the FOS or claim compensation from the FSCS in relation to the issuance of the bonds. Documentation and the sales process made clear that the investment was not protected by the Financial Services Compensation Scheme.
However, investors who have dealt with a regulated firm, such as Wellesley & Co Limited or a financial adviser, may have other sources of redress. Investors may be entitled to complain to the regulated firm, and if they are not happy with the outcome of their complaint, they may be able to refer the matter to the Financial Ombudsman Service. Further information can be found on the Financial Ombudsman Service website:
www.financial-ombudsman.org.uk/.
If the regulated firm they have dealt with is insolvent, investors might be entitled to bring a claim to the FSCS, e.g., for unsuitable advice on investments. The FSCS is operationally independent of the FCA and it is the FSCS that determines whether compensation is payable under the FCA’s compensation rules. Investors can find further information on the FSCS website at
www.fscs.org.uk/If the CVA is rejected can Wellesley clients prevent the company disingenuously being put into administration without all the other possibilities for resolving the transient liquidity issue being investigated?
If the CVA is rejected then the directors will have to consider alternative options for Wellesley Finance PLC (WFP) which may include an insolvency process. If the CVA is approved but subsequently fails because WFP cannot meet its obligations under the CVA then the proposal will explain the next steps. However, it is likely that the failure of the CVA will result in an insolvency of WFP and/or other companies in the group.
Free help with claims
Investors don't have to use a claims management company (CMC). It's free to claim compensation from financial companies if investors have been mis-sold the financial product. The first step is to contact the firm that sold the investment. If they are not happy with the firm's response, the Financial Ombudsman Service might be able to help.
Consumer organisations may also be able to help with making a free claim, e.g. the Money Advice Service or the Citizens Advice consumer service.
Find a claims management company (CMC)
As noted above investors do not have to use a CMC, however if they do wish to they should check our Register to ensure the CMC is authorised and approved by us. If they use a CMC that is not approved by us, they will not have access to the Financial Ombudsman Service or FSCS if things go wrong.
Unauthorised firms are also sometimes involved in scams. There is more information about this from avoiding unauthorised firms.
If investors are contacted by a CMC they believe isn't authorised, please advise them to contact us and we will investigate the firm.
Is Wellesley playing a game of 'brinksmanship'/chicken' with its clients in the hope they can 'bounce' clients into this awful CVA for the ultimate huge benefit of its Directors/Senior Management?
We cannot comment on a third party's intentions or actions.
What other urgent actions can the FCA take in relation to these matters?
On Thursday 10th September 2020, the FCA imposed a voluntary requirement (VREQ) on Wellesley & Co Limited (WCL) which prevents WCL from approving and publishing any new financial promotions and arranging any new investments. It also prevents WCL disposing of, dealing with or diminishing the value or any of its assets without the prior written consent of the FCA. A link to the entry register on our Financial Services Register can be found here. Please note that most of Wellesley's assets and liabilities are in companies outside the regulated firm and we have no formal powers over them.
We will continue where we can to secure the best possible outcome for investors in our role as regulator or Wellesley & Co Limited and are prepared to take such further action as is required. However, as mentioned above the companies in the group that issued the bonds, including WFP which is proposing the CVA, are not regulated by the FCA.
I hope my response has answered your questions and I do wish you all the best moving forward.
Yours sincerely
