Wednesday, 13 April 2016
Rebus case calls into question ECF platform's credentials
Rebus was a Claims Management Company (CMC).
People we have spoken with in the industry and indeed the ombudsman, FOS and the official bodies have all acknowledged that CMCs have a problem. They are in the regular practice of issuing false claims against IFAs. In 2015, the FOS received 2,707 complaints about advisers, 494 (18%) were upheld but only 113 (22%) of these were made by a CMC. This meant 78% of cases brought to FOS by a CMC were declined compared with 34% of cases against advisers in general. This data shows that the quality of CMC claims is disproportionately low.
Given that this has been an issue since at least 2013, you have to wonder why a site like Crowdcube, which claims to turn away 90% of applicants to the site, chose to run with Rebus. Rebus was not innovative, it was not cutting edge technology, it was yet another CMC - whose reputation in the market was far from good. Indeed Rebus had instigated the highly dubious practice of publishing a list of companies it was investigating even though many had not had and would not have the claims upheld.
You only have to look at the eventual price the administrator received for Rebus' claim's book to see how they went about their business.
So we have to put this down to a lack of experience or nouse or both on Crowdcube's part. Not only did the platform not know, by its own admission, that Rebus was in financial trouble, they did not know that Rebus was employing an FCA banned Director, Richard Rhyse or that the whole industry had a reputation that was far from perfect.
It rather neatly emphasises what we have been saying for 4 years - Crowdcube is not fit for purpose. We shouldnt let this platform endanger the future of equity crowdfunding. The only way this gets sorted is by investors using their power to call for change. It's clear in this instance and many others that the due diligence carried out by this one platform was not good enough - they expect investors to carry all that burden. The UK system just isnt set up to allow this - it has to be a collaborative effort. Other platforms manage it.