The FCA has publicly censured Blue Gate Capital and ordered it to pay £203,007 in restitution to investors who lost money investing in the Connaught Income Fund, Series 1.
The fund, also formerly known as the Guaranteed Low Risk Income Fund Series 1, is in liquidation.
Mark Steward, executive director of Enforcement and Market Oversight said: "FCA-authorised operators of funds are expected to undertake sufficient due diligence on the funds they operate. In this case, significant and serious deficiencies existed in the fund at the time Blue Gate became Operator of the Fund and these deficiencies left investors exposed and unprotected."
Significant and serious deficiencies existed in the fund at the time Blue Gate became Operator of the fund and these deficiencies left investors exposed and unprotected."
"In total, the FCA's actions in response to the failure of the fund, have led to investors receiving back, in net terms, the value of their investment in the Fund."
The fund was an unregulated collective investment scheme (UCIS) which commenced operation in March 2008, providing short term bridging finance to commercial operators in the UK property market.
Blue Gate took over as Operator of the fund from Capita Financial Managers Limited (CFM) on 25 September 2009 and remained as Operator until the Fund's compulsory liquidation on 3 December 2012.
The FCA found that Blue Gate failed to conduct adequate due diligence on the fund before taking it on, failed to investigate potentially serious issues with the fund of which it was aware and failed to establish that the fund was operating as it was supposed to.
The FCA also found that the company had failed to communicate with the fund's investors in a way that was clear, fair and not misleading.
These failings would have resulted in the imposition of a penalty of £10m, which would have been imposed if Blue Gate had not established it was in serious financial hardship.
The FCA said this morning it is publicly censuring Blue Gate and requiring it to pay restitution of £203,007 to the investors in the fund which reflects the profits earned by Blue Gate as Operator of the fund.