Fractional Investment Disputes

A Fractional Investment is a non-mainstream, pooled-funds investment. Some of these investments are unlikely to be labelled a collective investment scheme even though it is possible to argue that they are.

If you are considering investing in or being advised to invest in a fractional investment, you should check if your adviser is regulated.

If the scheme you are a part of turns out to be a collective investment scheme, and you have not got a financial advisor who is regulated, then this is an unregulated collective investment scheme (also referred to as a UCIS). Unregulated schemes are not supposed to be promoted to people unless they are high net worth investors or have assets of £200,000 or income of £100,0000 because they are high risk.

As solicitors are usually needed in the transactions, these types of investments come with a warning from the Solicitors Regulation Authority (SRA) as well as the recommendation that you need to read the leases properly.

The risk that comes with fractional investments is that there is no separation of assets between the individuals involved. With these types of investments, everyone who has invested and places money into a fraction of the property has all their money essentially go into the same pot. This means that if the investment is at risk, everyone is at risk – no matter the size of everyone’s offering.

Moreover, these investments are usually sold as leases; as if you are buying and having official ownership of the investment. However, without proof or a document that can be used to register your title as the owner, there is the risk that you may not own part of the property. With landmark cases such as Street v Mountford (1985) creating a framework and making distinctions between leasing vs. having a licence to a property, we are now able to clearly work out what type of investments these are as well as what you should expect from your investment.

Lastly, there is always a chance that these schemes are part of a Ponzi Scheme. This is a fraudulent investment scheme that promises high returns with minimal risk, however the scheme operates by using funds from new investors to pay returns to earlier investors, giving the illusion of profitability. You can avoid being unintentionally involved in one of these schemes by being careful when choosing a financial advisor and looking out for warning signs.

There are many different types of Fractional Investments. They are not exclusive to real estate and can come in various niche forms:

Fractional Stock Investing: This involves buying fractional shares of individual stocks or exchange-traded funds (ETFs). Investors can own a portion of a single share rather than purchasing a whole share. Fractional stock investing platforms have gained popularity in recent years, allowing investors to invest with smaller amounts of money.

Fractional Art Investing: Artworks, such as paintings, sculptures, or other collectible items, can be expensive to purchase outright. Fractional art investing platforms allow investors to buy shares or fractional ownership of valuable artworks. Investors can profit from potential price appreciation or rental income generated when the artwork is displayed in exhibitions or museums.

Fractional Cryptocurrency Investing: Cryptocurrencies, like Bitcoin or Ethereum, can be divided into smaller units known as Satoshis or Wei. Fractional cryptocurrency investing enables investors to purchase fractions of a cryptocurrency rather than whole coins. To some this is a more accessible entry into the cryptocurrency market.

Fractional Bond Investing: Bonds are debt instruments issued by governments or companies to raise capital. Fractional bond investing allows investors to own a fraction of a bond, which represents a proportional share of the bond’s face value and interest payments. This can provide diversification and income potential for investors.

Fractional Precious Metals Investing: Precious metals, such as gold, silver, or platinum, can be acquired in fractional amounts through various platforms. Fractional investing in precious metals allows investors to own a portion of a physical bar or coin without the need to purchase a full unit.

Fractional Loan Investing: Peer-to-peer lending platforms may offer fractional loan investing, where investors can lend money to borrowers in small portions and spread the investment risk across multiple loans. This potentially provides an income stream from interest payments.

If a financial advisor or solicitor recommended one of these schemes, or you were not aware of the high risk that these investments come with, you might have a claim for negligence against poor financial advice you received. If so, contact us immediately.

Our litigation team has extensive expertise in handling intricate scenarios, alleviating stress, and relentlessly pursuing the outcome you desire. We understand the complex regulatory regime which governs the financial sector, including the Financial Conduct Authority (FCA) and the Conduct of Business Sourcebook Rules (COBS).

If you suffer loss because of bad or negligent financial advice then you may be able to recover your money, as well as the money you could have made, had you been advised properly.

In addition to your claim, we also recommend reaching out to anyone you know who is also suffering from the same negligence. Although your claim alone will be valid, the popular saying “there’s strength in numbers” can apply here. If every person who has invested in a portion can work together to create a group claim this can strengthen the case.

The High Court has ruled in favour of the Financial Conduct Authority (FCA) against an illegal care home investment scheme by Qualia Care Developments Ltd. The scheme has effectively been labelled “a ponzi-like scheme” and has been considered unlawful. Moreover, the conveyancing solicitors that Qualia recommended, Gaddes Noble Property Lawyers, did not do their due diligence and duty of care regarding the investment schemes.

If you or someone you know has been personally affected by Qualia Care Developments Ltd and/or Gaddes Noble Property Lawyers, then reach out to us. Contact us via telephone on 01273 604123 or by email, enquire@bbc-law.co.uk. You can also visit our office at 30 Old Steine, Brighton, BN1 1FL.