Gallium Fund Solutions Limited · DRN-5892445

The complaint Mr H complains about the arrangement of investments in property developments, “C” and “R”. Mr H’s complaint has been brought on his behalf by a professional representative. The key points it has made, in summary, are: • An appointed representative (AR) of Gallium Fund Solutions Limited (”Gallium”) called Brickowner Limited (“Brickowner”) arranged the investments and, when doing so, failed to meet its regulatory obligations. • The investment was subject to rules restricting who it could be sold to, which meant it could and should not have been sold to Mr H. • It was sold to Mr H on the basis of an inadequate application process on the AR’s website, which breached those rules. This also amounted to a breach of the Principles for Businesses, which set out requirements to act with due care and treat customers fairly. Background Brickowner’s business Brickowner was an AR of Gallium from 11 August 2016 to 17 September 2019. At the time of the events subject to complaint, Brickowner operated primarily online. Its business was property investments, offered through investment in Brickowner Investments Limited, and its website sought to introduce potential investors to a number of property investments it had available at any given time. An undated document provided by Gallium entitled “Brickowner Investments Limited Generic Information Memorandum” explains the structure of the investments as follows: “Each series of shares issued by the Company [Brickowner Investments Limited] will relate to a property investment opportunity, including indirect participation in property-related investments, (a Property) that is described in the Properties section of the Brickowner website —www.brickowner.corn/properties. Information that is specific to the specific Share classes and underlying assets is contained on the website and information that applies to all Share classes is contained in this Information Memorandum. The Company will issue different classes of Shares for £1 each that will be allocated to a specific property investment opportunity. For example, £1 X Shares could be invested into Property Y or invested into Property Fund Z. ln this example, X could be any description that distinguishes those shares from other share classes the Company has issued in respect of other Properties, so that investor returns only relate to the specific Property they have identified. Each of the Share classes currently share some common features, which are set out below.

-- 1 of 19 --

Each £1 X Share is a block of 100 shares, consisting of 99 2% Cumulative Redeemable Preference X Shares of 1 pence each (CRPS) and 1 X Ordinary Share of 1 pence in the Company. The £1 X Shares are referred to in this Information Memorandum as shares. The proceeds of issue of the Shares will be limited to investing in the Property and paying associated costs. Each block of 99 CRPS and 1 X Ordinary Share cannot be split. If an investor wishes to sell their holding on the Brickowner secondary market, each 100-share block (or £1 Share) must be sold together.” As I set out below, it appears there may have been an appendix to this Information Memorandum, relating to the C investment, which set out some specifics about the particular investment Mr H was making. I have not seen any such document relating to R. Mr H’s dealings with Brickowner Mr H’s complaint relates to a number of investments he made with Brickowner. • £97,087 into R on 6 February 2018 • £2,912 into R on 22 February 2018 • £97,087 into C on 4 May 2018 In March 2018 (there is no archive available for February 2018) the home page of Brickowner’s website displayed three “featured properties”, including R. R was described as a residential development, with a one year investment term, and a predicted investment return of 32.66%. Other than the target amount of funding, there were no further details given here. Later, the home page displayed three different “featured properties”, including C. C was also described as a residential development, with a one year investment term, and had a predicted investment return of 24%. Other than the target amount of funding, there were no further details given here. On both occasions the website also said, in a section on the home page titled “How it works”: “Invest as little as £100 up to as much as you like into properties of your choosing. We aim to provide you with access to exclusive institutional grade property investments which would otherwise be inaccessible to most investors. You can build your own property portfolio by investing in a number of different properties on the platform. You can add funds and increase the size of your portfolio whenever you want, should you wish to do so. Its completely your decision as to what you invest in, how much you invest, and when you invest.” A large “join here to invest” button was displayed on the home page. It appears this led to an account opening process on the website (further detail of which I set out below, although its exact make-up at the time is a matter of dispute). I have not seen the web page which displayed details of C or R at the time. There is, however, an Information Memorandum “Appendix to [C]” (it is not clear whether it is an appendix to the generic Information Memorandum mentioned above or appendix to a C- specific Information Memorandum which I have not seen) online, which sets out some

-- 2 of 19 --

details of the C investment. Amongst other things, it explains there will be equity investment (i.e. investor contributions) of £582,324 and borrowing of £1,065,924, to fund the development. It provides details of the developer, and some examples of its track record. It also explains: • “The freehold for the Bristol Site will be owned by Brickowner investors through an independent investment company set up for this investment (known as a Special Purpose Vehicle). • Investing through an SPV means your investment is ring-fenced to provide additional security” I have not seen any details of R, but it appears to have had a similar structure to C, albeit the property involved was a town centre office block in Devon. The updates issued on R suggest it, like C, used a high level of borrowing. Gallium has submitted updates which were issued on C by Brickowner or Brickowner Investments Limited from 2019. These decreased in frequency over time, with only two updates given in 2021 and one in 2022. From late 2019 the updates referred to delays being experienced, as a result of flats in the development taking longer than expected to sell, and issues with the lender. And the 10 September 2021 update sets out a new projected return of between -24% and +10%. I have not seen any updates after 8 November 2022 but understand Mr H ultimately suffered a complete loss of his investment. I have also seen updates which were issued on R by Brickowner or Brickowner Investments Limited from 2020. These were initially largely positive – saying there was an issue with the developer but the development was still on track to deliver the anticipated return to investors. However, the later updates set out a deteriorating position, explaining that a loss was anticipated, with the final update, issued in late 2023, setting out that “losses could exceed 90% of the capital invested.” I understand the investment ultimately failed. These updates make several references to the investment being a SPV (Special Purpose Vehicle). Gallium’s response to Mr H’s complaint Gallium said the complaint had been made outside the time limits set out in our rules. It also said: • All investments made went into specific share classes of a small FCA registered AIFM (I assume this is intended to refer to Alternative Investment Fund Manager) called Brickowner Investments Ltd. • The investor documents held by Brickowner show that Mr H self-classified himself as a Self-Certified Sophisticated Investor during the application process, and was not therefore an individual with no specialist knowledge or expertise in investment matters, as the representative had suggested. • The series of “Yes/No” questions the representative has referred to were in fact an appropriateness assessment. • Risk warnings were clearly visible on the Brickowner website and referenced in the Information Memorandum. • Mr H could not proceed with the application until he confirmed he understood the appropriateness questions.

-- 3 of 19 --

• At the time of Brickowner being an AR of Gallium, it was not subject to the suitability rules, only the appropriateness rules. Brickowner has never provided financial advice. Once the complaint was referred to us, Gallium maintained it had been made too late. Our investigator considered this, and concluded the complaint had been made in time. In relation to C, she said the complaint had been made within six years of that investment being made, as it was raised with Gallium, and acknowledged by it, in March 2024. In relation to R, our investigator said the complaint had been made more than six years after the investments but she was not persuaded Mr H should reasonably have been aware of cause for complaint more than three years before the complaint was made. So, the complaint had not been made too late under the relevant rules. Gallium accepted the complaint, insofar as it related to C, had been made in time. But maintained the complaint about R had not been made in time. At this point, Gallium made some further submissions. Its key points, in summary were: • Investors through Brickowner have to classify as either High Net-Worth Investors or Self-Certified Sophisticated Investors. Investors were required to meet the relevant criteria applicable under the Financial Conduct Authority (FCA) COBS rules and needed to sign a completed investor statement. • It cannot provide a copy of the statement signed by Mr H but can confirm this was obtained. • It would like to bring to our attention the disclaimers, key risks, and the suitability questionnaire, which all investors are required to complete before being able to view investment opportunities. • Mr H clearly understood the investor journey and was able to supply a completed investor statement, and he confirmed his understanding of all the risks applicable to the investments. • The performance of the investment is not something Gallium can be held responsible for after Brickowner ceased to be its AR. In further submissions, Gallium said: • It had now located screenshots showing the Brickowner website and entire application process that was in effect in 2018 and when Mr H applied to invest in Brickowner (copies of these screenshots were provided). • These screenshots show Mr H would have been required to confirm that the following: o That he understood the value of property is not guaranteed to increase. o That he understood that he may not be able to sell and withdraw his investment. o That he read the risk warnings and understood the risks associated with an investment in Brickowner. • In the High Net Worth Investor statement Mr H accepted the following:

-- 4 of 19 --

“I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from somone who specialises in advising on non- mainstream pooled investments.” • As Mr H invested a significant sum of money, he would have understood the gravity of the risk warnings and potential ramifications if things were to go wrong. There is no evidence to show he did not understand the risk warnings. • To be clear, Brickowner provides an execution-only service and will not assess the suitability of the transaction based on information provided to them by the client. Brickowner will not provide advice or a recommendation. It was only and primarily Mr H’s choice to make and proceed with the investments. • Brickowner is an online automated platform. It is designed to be non-invasive, unpressured, and unforced. This is done through the process being passive, where the investors take charge, and by limiting interaction. The process collates all information that is required from prospective investors. • Brickowner undertake an extra questionnaire for investors that fund their accounts with large sums. It was unable to source a questionnaire Mr H completed in 2018, but is able to provide the results from the questionnaire completed by Mr H in March 2019 (this was attached). Gallium referred to the suitability questionnaire, disclaimers and key risks as being those shown in a document it had attached, titled “Brickowner Investment Flowchart – Appendix”. This document is dated “H1 2021”. Our investigator’s view Our investigator maintained the complaint about R had been made in time and, accordingly considered the merits of Mr H’s complaint about all the investments he had made with Brickowner. She said, in summary: • The available evidence suggests Mr H was neither sophisticated nor high net worth – and she was not persuaded he would have declared himself to be either of these things, had the wording set out in the relevant rules been used. So, there was no basis on which the investment could have been promoted to Mr H. • There were also further restrictions on the promotion of Non-Mainstream Pooled Investments (NMPI) to retail clients, like Mr H which required a preliminary assessment of Mr H’s profile and objectives, and consideration of whether it was likely to be suitable for him. • She had not seen sufficient evidence to show that Brickowner, on Gallium’s behalf, took adequate steps to meet the requirements of the applicable rules. It did not take adequate steps to check that the investment was suitable for Mr H. • If Brickowner, on Gallium’s behalf, had taken sufficient steps to meet the requirements of the rules, it ought to have concluded that the investment should not be promoted to Mr H. On this basis, our investigator concluded it was fair to ask Gallium to compensate Mr H for

-- 5 of 19 --

the loss he suffered through making the investments. Gallium did not accept this view. Its response focussed on why it maintained the complaint about the investments in R had been made too late. I issued a decision concluding that the complaint about the investments in R had been made in time and that, accordingly, I could consider Mr H’s complaint in relation to all the investments he had made with Brickowner. I then proceeded to consider the merits of Mr H’s complaints about the investments he made. My provisional decision I recently issued a provisional decision. As I largely repeat the decision below, I will not include a detailed summary here. In brief, I concluded Mr H had made investments which were NMPI and rules therefore applied to their promotion. I said, in my view, those rules had not been followed and, if they had, the investments would not have been promoted to Mr H. And it was fair to ask Gallium to compensate Mr H for the loss he had suffered. Responses to my provisional decision Mr H’s representative said he accepted the provisional decision, and had nothing further to add. Gallium did not accept my decision. It said, in summary: • I have failed to consider how Mr H’s occupation would affect the suitability and appropriateness argument. As Mr H works in construction, he would have a better understanding of property development investments. Given that he works in the industry, he would and should have understood all the potential risks of the investment, and he would have understood the entire development process. • I have also disregarded how Mr H self-classified himself as a sophisticated investor. The definition of this was explained during the sign up process, and if this was unsuitable for Mr H then there were other options that may have better fit his situation, thus it is clear Mr H considered himself to be a sophisticated investor at sign-up. • The FOS appear to not have enquired with Mr H as to what previous investment experience Mr H possessed. It simply cannot be the case that Mr H blindly completed the application process, without carefully considering the options, then invested £200,000.00 into Brickowner. Gallium also repeated arguments it had made previously about our time limits, which I had considered when issuing my provisional and final decisions on jurisdiction. In my provisional decision, I set out that Mr H had limited investment experience, as he held no other investments at the time of making the investments in C and R. I recently asked Mr H’s representatives to confirm whether Mr H had previously made investments. It confirmed he had not; he had a savings account but had made no other investments aside from cash. I also asked whether Mr H could recall signing a High Net Worth or sophisticated investor statement. I response, the representative said because Mr H had recently sold his home he had approximately £600,000 sitting in the bank and so considered himself to meet the High Net Worth criteria, and believes he would have selected this category in order to move to the

-- 6 of 19 --

next stage of the investment application process. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I note Gallium has referred to time limits in its response to my provisional decision. For the reasons I set out in my decisions on this point, I am satisfied this complaint has been made in time. Having made a decision to that effect, my focus in my provisional decision, and again here, is on the merits of Mr H’s complaint. Having carefully considered Gallium’s response to my provisional decision, I have not been persuaded to depart from my provisional findings. I have therefore largely repeated my provisional decision below – save for where I consider the points Gallium made in its response - as my final decision. I am required to make my own independent determination of this complaint by reference to what I consider to be fair and reasonable in all the circumstances of the case. When considering what is fair and reasonable, I am required to take into account: relevant law and regulations; regulators' rules, guidance and standards; codes of practice; and, where appropriate, what I consider to have been good industry practice at the relevant time. With that in mind I will start by setting out what I consider to be the key relevant considerations to deciding what is fair and reasonable in this case. The investment in C To establish the relevant regulators' rules, guidance and standards, I need to determine the nature of the investment Mr H made. In my view, based on the evidence available, and considering the FCA Glossary definitions in place at the time, the investment was not a non-readily realisable security, but a Non- Mainstream Pooled Investment (NMPI). At the time of the investment, the FCA Glossary included the following definitions (I have only quoted the parts which are relevant here): “non-readily realisable security a security which is not any of the following: (a) a readily realisable security;” “(c) a non-mainstream pooled investment;” “Non-Mainstream Pooled investment any of the following investments: (a) a unit in an unregulated collective investment scheme;” “(c) a security issued by a special purpose vehicle, other than an excluded security;” The generic Information Memorandum suggests the investment will take the form of shares issued by Brickowner Investments Limited. The shares of Brickowner Investments Limited

-- 7 of 19 --

did not trade on a recognised exchange, and I have not seen any evidence to suggest that there were plans to list the shares. So, they were not a readily realisable security, and therefore meet that part of the FCA’s definition of a non-readily realisable security. However, the available evidence suggests the investment was a NMPI; and that it does not therefore meet the definition of non-readily realisable security on that basis. The “Appendix to [C]” document, as set out above, says the freehold for the site will be owned by “Brickowner investors” (as the header of the document is “Brickowner Investments Limited” I assume “Brickowner” means that business, although it is not defined in the Appendix) through a SPV and goes on to say Mr H would be “investing through a SPV”. So, it appears that investment involved Mr H receiving securities (i.e. shares) issued by a SPV – described in the Appendix as the “independent investment company set up for this investment”. The alternative seems to be that Mr H was buying a specific share class of Brickowner Investments Limited a The FCA Glossary definition of a SPV is as follows “a body corporate, explicitly established for the purpose of securitising assets, whose sole purpose (either generally or when acting in a particular capacity) is to carry out one or more of the following functions: (a) issuing designated investments, other than life policies; (b) redeeming or terminating or repurchasing (whether with a view to re-issue or to cancellation) an issue (in whole or part) of designated investments, other than life policies; (c) entering into transactions or terminating transactions involving designated investments in connection with the issue, redemption, termination or re-purchase of designated investments, other than life policies;” So, if the investment was made in Brickowner Investments Limited, rather than directly into the individual property (i.e. C) SPV, Brickowner Investments Limited was the SPV – it issued shares to securitise the property development; and that (alongside securitising other property developments) appears to have been the purpose for which it was established, and its only business i.e. its sole purpose. This structure would therefore also have involved Mr H receiving securities (i.e. shares) issued by a SPV. In either event, as the SPV does not come within any of the provisions of the definition of an excluded security, the investment meets the definition of a NMPI. If that analysis is not correct - i.e. Brickowner Investments Limited was operating in this way but not an SPV - the alternative is C was an Alternative Investment Fund (AIF) or Brickowner Investments Limited was an AIF and therefore, in the circumstances, an Unregulated Collective Investment Scheme (UCIS); and the investment meets the definition of a NMPI on that basis instead. This conclusion is supported by a number of pieces of evidence. The Generic Information Memorandum says: “The Company is registered with the Financial Conduct Authority (FCA) as a small registered self-managed alternative investment fund manager pursuant to article 10(2) of the Alternative Investment Fund Managers Regulations 2013.”

-- 8 of 19 --

Which infers Brickowner Investments Limited is an AIFM (Alternative Investment Fund Manager). The wording on the Brickowner website at the time also included the following, which is consistent on the subject of the nature of Brickowner Investments Limited: “Brickowner Investments Limited is a small registered alternative investment fund manager (Reference number: 775256) and is not authorised and regulated by the Financial Conduct Authority.” And the wording shown on an archived later version of Brickowner’s website is consistent with this: “Funds are invested via a self-managed AIF (Alternative Investment Fund) known as Brickowner Investments Ltd (a limited company)” Gallium’s final response letter (and later submissions to us) also appear to acknowledge Brickowner lnvestments Ltd was an AIF: “all investments made went into specific share classes of a small FCA registered AIFM called Brickowner lnvestments Ltd”. I am therefore satisfied the investment Mr H made met the definition of NMPI at either (a) or (c) and therefore ought to have been treated as such throughout. I will now set out what this means for the relevant considerations in this case. Relevant considerations It is not disputed that Brickowner promoted the investments in C and R to Mr H, and arranged his investments in them. And I am satisfied that Brickowner did promote the investments in C and R to Mr H and arranged his investments in them. It is also not disputed that Mr H was a retail client; and I am satisfied he was. As the investments were NMPI promotion of them to retail clients was effectively banned at the time of Mr H’s investments. There were rules setting out exemptions to this; and those rules would therefore have applied here. I have set the relevant rules out below. COBS 4.12.3R Section (1) of this rule says: “A firm must not communicate or approve an invitation or inducement to participate in, acquire, or underwrite a non-mainstream pooled investment where that invitation or inducement is addressed to or disseminated in such a way that it is likely to be received by a retail client.” Section (2) of the rule refers to the statutory restriction on promotion of UCIS in section 238 of the Financial Services and Markets Act (FSMA). COBS 4.12.4R sets out exemptions to 4.12.3R(1) and the statutory restriction: “(1) The restriction in COBS 4.12.3 R does not apply if the promotion falls within an exemption in the table in (5) below. (2) A firm may communicate an invitation or inducement to participate in an unregulated collective investment scheme without breaching the restriction on promotion in section 238 of the Act if the promotion falls within an exemption in the table in (5) below.”

-- 9 of 19 --

So, whether they were a UCIS or some other form of NMPI, the investments could only be promoted to Mr H if one of the exemptions applied. From those set out in the table at (5), the only exemptions which could apply here are: “2. Certified high net worth investors Promotion to: An individual who meets the requirements set out in COBS 4.12.6 R, or a person (or persons) legally empowered to make investment decisions on behalf of such individual. Promotion of a non-mainstream pooled investment which is: Any non-mainstream pooled investment the firm considers is likely to be suitable for that client, based on a preliminary assessment of the client's profile and objectives. [See COBS 4.12.5G (2)]” “9. Self-certified sophisticated investors Promotion to: An individual who meets the requirements set out in COBS 4.12.8 R, including an individual who is legally empowered (solely or jointly with others) to make investment decisions on behalf of another person who is the firm's client. Promotion of a non-mainstream pooled investment which is: Any non-mainstream pooled investment the firm considers is likely to be suitable for that client, based on a preliminary assessment of the client's profile and objectives. [See COBS 4.12.5G (2)]” The relevant guidance at COBS 4.12.5G says: “(2) (a) A firm which wishes to rely on exemptions 2 (certified high net worth investors), 9 (self-certified sophisticated investors) ….. as provided under COBS 4.12.4R (5), should note that these exemptions require a preliminary assessment of suitability before promotion of the non-mainstream pooled investment to clients (in addition to other requirements).” COBS 4.12.6 R This sets out the criteria for a High Net Worth investor as follows: • “I had, throughout the financial year immediately preceding the date below, an annual income to the value of £100,000 or more. Annual income for these purposes does not include money withdrawn from my pension savings (except where the withdrawals are used directly for income in retirement). • I held, throughout the financial year immediately preceding the date below, net assets to the value of £250,000 or more. Net assets for these purposes do not include: (a) the property which is my primary residence or any money raised through a loan secured on that property; or

-- 10 of 19 --

(b) any rights of mine under a qualifying contract of insurance; or (c) any benefits (in the form of pensions or otherwise) which are payable on the termination of my service or on my death or retirement and to which I am (or my dependants are), or may be, entitled; or (d) any withdrawals from my pension savings (except where the withdrawals are used directly for income in retirement).” COBS 4.12.8 R This sets out the criteria for a self-certified sophisticated investor as follows: “I am a self-certified sophisticated investor because at least one of the following applies: (a) I am a member of a network or syndicate of business angels and have been so for at least the last six months prior to the date below; (b) I have made more than one investment in an unlisted company in the two years prior to the date below; (c) I am working, or have worked in the two years prior to the date below, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises; (d) I am currently, or have been in the two years prior to the date below, a director of a company with an annual turnover of at least £1 million.” The Principles for Businesses I also think the Principles for Businesses, which are set out in the FCA’s Handbook “are a general statement of the fundamental obligations of firms under the regulatory system” (PRIN 1.1.2G) are a relevant consideration. And I think Principle 6 is particularly relevant here: “Principle 6 – Customers’ interests – A firm must pay due regard to the interests of its customers and treat them fairly.” Summary of my findings Having considered all the available evidence and arguments I have concluded the complaint should be upheld. In summary: • Gallium has made inconsistent submissions about the investor categorisation relied on by Brickowner, on behalf of Gallium, when promoting the investments; saying in some submissions it was self-certified sophisticated investor and in others it was High Net Worth Investor. I note its latest position is Mr H was a self-certified sophisticated investor. However, no evidence has been provided to show this. • I remain unpersuaded Mr H was a sophisticated investor, and would have declared himself to be such. But I also remain of the view it is likely Mr H could have met the definition of a High Net Worth Investor; and it seems he may have declared himself to be one. • There were, however, further restrictions on the promotion of NMPI to retail clients,

-- 11 of 19 --

like Mr H, which required a preliminary assessment of Mr H’s profile and objectives, and consideration of whether the investment was likely to be suitable for him. • The purpose of those rules was to prevent such investments being offered to those for whom they may not be suitable. • I have not seen sufficient evidence to show that Brickowner, on Gallium’s behalf, took adequate steps to meet the requirements of the applicable rules. It did not take adequate steps to check that the investments were suitable for Mr H. • I am satisfied that, if Brickowner, on Gallium’s behalf had taken sufficient steps to meet the requirements of the rules, it should have concluded it should not promote the investments to Mr H because the required steps had not been completed. Or it should have ensured that the required steps were completed, which would have meant the investments would not have proceeded, as there was no basis on which they could be promoted to Mr H. • It is therefore fair and reasonable to require Gallium to compensate Mr H for the loss suffered through the investments in C and R. I have set my findings out in more detail below. The application process Gallium has provided screenshots from Brickowner’s website which it says show the application process followed by Mr H before he made the investments in C and R. The screenshots show the following set out at the outset of the application: “Step 1/3 Understanding Property Investment Please choose from the below investor category that best describes you High net worth Investor I earn more than £100,000 a year or have net assets over £250,000 Self-certified Sophisticated Investor I am an experienced investor and understand risk Everyday Investor his includes first time, and ordinary investors” They show consumers were then asked to tick a box under which of the three applied to them; and were then asked to answer five “yes or no” questions, as follows: “Investment Returns I understand that investment returns can be generated by capital growth, rental income, or both Property Value I understand that the value of property is not guaranteed to always increase

-- 12 of 19 --

Investment Strategy I understand that spreading my investment over a number of properties helps to reduce risk Ability to Sell Investment I understand that if I want to sell my investment, I am not always guaranteed to find a buyer willing to pay the price I want FAQs and Risk Warning I have read and understand the FAQs and Risk Warning” I understand consumers were required to answer “yes” to each of these questions before they could proceed; and had multiple opportunities to answer them (although it is not known what message was displayed if a question was answered “no”). Consumers were then asked to press a “Continue” button, after which a statement relevant to whichever of the three categories had been selected was displayed. In Mr H’s case, Gallium has said in some submissions that he had selected “sophisticated investor” but, in other submissions, Gallium says Mr H selected “High net worth Investor”. Gallium has referred to investor documents Brickowner holds when making these submissions but also said it cannot provide copies of any forms Mr H completed. In its response to my provisional decision, Gallium says Mr H had certified himself to be a sophisticated investor; but it has not provided any further evidence on this point. As mentioned, Mr H’s recollection is he said he was a High Net Worth investor. The screen prints Gallium has submitted show a similar – but not identical – statement to that set out in the rules quoted above in relation to either the High Net Worth Investor or self- certified sophisticated investor classifications was displayed on Brickowner’s website. At their conclusion they say: “I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non- mainstream pooled investments.” Consumers were then asked to tick a box which said “I hereby sign the above statement to declare that as of today’s date I am a high net worth individual as described above.” Following these statements (whichever is selected) the screenshots show consumers were asked to provide their personal details and to add funds to their account. I note these screenshots appear to date from September 2018 – so, four to seven months after Mr H applied for his investments. I also note that an archive record of the homepage of Brickowner’s website from around the time Mr H invested appears to differ from the screen prints Gallium has provided. I am not therefore certain that the screenshots provided precisely reflect the applications Mr H would have completed. As mentioned above, Gallium has also provided a copy of a flowchart, which sets out an investment application process. This appears to significantly post-date Mr H’s application, and is not therefore evidence of what he would have been at the time of making the investments in C and R. However, it is not disputed that some form of application process was followed by Mr H on

-- 13 of 19 --

Brickowner’s website and I think it is reasonable to assume, in the absence of any further evidence, that the process Mr H followed did at least look similar to the screenshots Gallium has provided. I have therefore made my decision on the basis that the screenshots do, largely, reflect the process Mr H followed. In its submissions Gallium has referred to a questionnaire completed by Mr H in 2019. This is not, however, a relevant consideration here, as I am looking at whether the investment ought to have been promoted to Mr H at the outset. In any event, the form only contains a few basic details. The process and the requirements of the relevant rules Categorisation As I have set out, Gallium has made inconsistent submissions on this point, and has not provided any evidence to show what category Mr H declared himself to belong to. Its latest position, following my provisional decision, is that Mr H was a self-certified sophisticated investor. However, as mentioned, it has not provided any further evidence on this point. And Mr H’s recollection is he said he was a High Net Worth investor. I am not persuaded Mr H could have met the definition of a self-certified sophisticated investor as his profile was not consistent with that definition; and I am not therefore persuaded he would have declared himself to be a self-certified sophisticated investor. However, the available evidence suggests Mr H could have declared himself to be a High Net Worth Investor, as it appears he met the definition of an investor in that category; which would have offered a basis for Brickowner, on behalf of Gallium, to promote the investments in C and R to Mr H. And, given his recollection, it seems Mr H may have declared himself to be a High Net Worth Investor. Given the uncertainties on this point, and that the rules required an assessment of suitability in addition to the categorisation, in any event, I am going to focus on that suitability assessment. Suitability In addition to putting Mr H into one of the relevant investment categories, Brickowner, acting on behalf of Gallium was, in order for the relevant exemptions set out in the table at COBS 4.12.4R (5) to apply, also required to consider whether an investment in C or R was likely to be suitable for Mr H, based on a preliminary assessment of his profile and objectives, before making any promotion of the investment. The guidance in COBS, at COBS 4.12.5G (2), set out further detail on this, as follows: “(c) The requirement for a preliminary assessment of suitability does not extend to a full suitability assessment, unless advice is being offered in relation to the nonmainstream pooled investment being promoted, in which case the requirements in COBS 9 or 9A apply (as applicable). However, it requires that the firm takes reasonable steps to acquaint itself with the client's profile and objectives in order to ascertain whether the non-mainstream pooled investment under contemplation is likely to be suitable for that client. The firm should not promote the non-mainstream pooled investment to the client if it does not consider it likely to be suitable for that client following such preliminary assessment” I think it is important here to emphasise the investments Mr H made were not a straightforward product. Mr H was not simply buying a share of a property. He was investing money into a SPV or an AIF which, together with significant bank borrowing, was being used to fund the purchase and development of a building. There were multiple parties involved –

-- 14 of 19 --

building trades, architects, development managers, the provider of the lending etc. And the risks were multifactorial – it was not simply a question of whether the property in question would go up in value. The high gearing alone made the investments high risk ones. There was also the focus on a single development, a lack of liquidity, and the risks of delays and rising costs, all of which could be caused or contributed to by multiple parties - which was a key point, given the “Appendix” document for C sets out estimates of costs without apparently any independent verification (and there is no evidence of this detail having been provided at all in relation to R). Furthermore, there was a complex security structure involving a SPV holding the freehold, without a clear explanation of how exactly this worked being provided in the “Appendix” document for C (again, there is no evidence of this detail having been provided at all in relation to R). The investments were therefore complex, risky and specialist; and this is why they fell into a category of investment on which the FCA put restrictions as to who they could be promoted. They were highly unlikely to be suitable for the vast majority of retail clients. And an obvious risk of consumer detriment arises if the rules restricting promotion were not properly applied. Pausing there, I note Gallium’s point, made in its response to my provisional decision, that Mr H was a builder and would therefore have fully understood the risk associated with property development. I agree that Mr H’s vocation would have given him some knowledge of property development. But it does not follow he would have understood the risks associated with highly geared collective investments. And I have seen no evidence to suggest he did have such an understanding. So, he should have been treated as an ordinary retail investor, as required by the relevant rules. I say this to illustrate that the importance of Brickowner, on behalf of Gallium, fully meeting its regulatory obligations here was high. Its responsibility was significant. And the steps it took to meet its regulatory obligations need to be considered with that in mind. As set out, it appears all that was asked of Mr H were the five “yes or no” questions quoted. These questions, in my view, did not provide sufficient information to allow Brickowner, on behalf of Gallium, to make any meaningful assessment of whether an investment in C or R was suitable for Mr H. They did not amount to “reasonable steps to acquaint itself with the client's profile and objectives”. The questions asked, in my view, did no more than test whether Mr H had a basic knowledge of investing. They simply asked if Mr H understood returns could be generated in different ways and were not guaranteed, that diversification reduces risk, and a sale at the price wanted might not be possible. The questions did not therefore allow Brickowner, on behalf of Gallium, to consider whether an investment in C or R was likely to be suitable for Mr H. No questions are asked about his personal and financial circumstances; nor his investment objectives. So, Brickowner simply could not make any assessment of the suitability of the investment for Mr H, as it obtained none of the information needed to make such an assessment What should Brickowner, on behalf of Gallium have done? As no preliminary assessment of suitability had been carried out, Brickowner, on behalf of Gallium, should have concluded that it could not promote C or R to Mr H. So, matters should have concluded there. Or it could, alternatively, have proceeded to make the assessment. Had Brickowner, on behalf of Gallium, followed the applicable rules - had a preliminary

-- 15 of 19 --

assessment of Mr H’s profile and objectives been carried out - this would have revealed an investment in C or R was not likely to be suitable for Mr H. A preliminary assessment would have revealed there was no basis to conclude high risk specialised investments like C and R were suitable for Mr H. Mr H had limited investment experience. Mr H had made no other investments at the time he invested into C and R. And his representative has confirmed he had only ever held savings in cash. As I set out above, I am also not persuaded that Mr H’s work as a builder would have meant he had a full understanding of the risks associated with investments like C and R. The source of the funds used to make the investments was the sale of Mr H’s home in London. After the mortgage on that property had been paid off, he held approximately £600,000 in cash. He was in the process of travelling and had not purchased a new house, but his intention was to return to Ireland and use the retained funds to purchase a home there. He also had an apartment in Spain which he sold in January 2020 for Euro 200,000. He is a self-employed builder who, at the time of investment, had an approximate total annual income no greater than £10,000. So, there would have been no evidence Mr H had the tolerance or capacity for a high level of risk, or of the investments being otherwise consistent with his objectives. Any reasonable preliminary assessment of suitability would therefore have given Brickowner, on behalf of Gallium, reason to conclude a promotion could not be made. All in all, I am satisfied that if Brickowner, acting on behalf of Gallium, had acted fairly and reasonably to meet the relevant regulatory obligations the investments would not have been promoted to Mr H because they were not likely to be suitable for him. No investments would therefore have been made, had Gallium followed the rules. Risk warnings Gallium has referred to Mr H having been told of, and understanding, the risks associated with the investment. I do not think that, in the circumstances, it would have been fair and reasonable for Brickowner to have proceeded to promote the investments to Mr H, in reliance on any risk warnings it had given; as there was no basis under the rules for it to do so, and the promotion would not therefore have been consistent with its regulatory obligations. On the subject of risk warnings, the available evidence gives further evidence of why it was not fair and reasonable for Brickowner, on behalf of Gallium, to promote the investment to Mr H. Gallium has specifically referred to “Disclaimers” and “Key Risks”; but has also provided screenshots of an application process which does not feature those terms. The document Gallium has submitted which sets out these sections is dated H1 2021 – long after Mr H’s application was made, and after Brickowner ceased to be an AR of Gallium. I am not therefore persuaded that the “Disclaimers” and “Key Risks” Gallium refers to were seen by Mr H at the time; or made available to him. The screenshots refer to “FAQs and Risk Warning”. But neither the Risk Warning nor FAQs pages appear to have been archived, and Gallium has not submitted copies of them; so, I do not know what they said. The archived webpages from around the time I have seen do provide a warning that capital is at risk and FSCS protection may not apply. And the self-certified sophisticated investor and High Net Worth statements say, as required by the rules, “I accept that the investments

-- 16 of 19 --

to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested”. So, it seems some warnings were given. However, they fall a long way short of a full explanation of the risks. And the Information Memorandum documents – if they were seen by Mr H – do not provide such an explanation either. These general warnings also need to be viewed in context of what was said about the risk associated with the Brickowner investments specifically. In relation to this, I note that the home page of Brickowner’s website around the time included the following, in relation to the investments it offered: “Secure & safe (in large bold letters) Government regulated Brickowner is an Appointed Representative of Gallium Fund Solutions Ltd which is authorised and regulated by the Financial Conduct Authority (FCA). The FCA is the UK organisation that regulates and supervises the financial services industry in the UK with the intention of protecting consumers. Ring fenced investments Your investments are ring-fenced and separated from the assets and liabilities of Brickowner Limited. Each property investment is made via a UK limited company that is distinct from Brickowner Limited. This means if Brickowner Limited were to fall into financial distress, it would not affect the value of your investment. Uninvested funds are protected Funds which are shown in your account on Brickowner which are not invested are held on trust in a segregated account on your behalf. This is a separate bank account which is protected and ring-fenced from Brickowner monies.” So, I am not persuaded that Brickowner, on behalf of Gallium, provided a full explanation of the risks; the available evidence instead suggests inadequate and possibly misleading statements were instead made about risk. However, I make this only as a secondary point. As mentioned, Brickowner, on behalf of Gallium, simply should not have promoted the investment, in any event. I will now turn to consider fair compensation. Putting things right Fair compensation In assessing what would be fair compensation, I consider that my aim should be to put Mr H as close to the position he would probably now be in if he had not made the investments in C and R. For the reasons I have set out, I am satisfied that the investments should not have been promoted to Mr H by Brickowner, on behalf of Gallium. They should not therefore have proceeded; and Mr H would not have suffered the loss he has. I think Mr H would have invested differently. It is not possible to say precisely what he would

-- 17 of 19 --

have done, but I think it likely he would have made lower risk investments, which were suitable for his circumstances. I am therefore satisfied that what I have set out below is fair and reasonable given Mr H's circumstances and objectives when he invested. What should Gallium do? To compensate Mr H fairly, Gallium must: • Compare the performance of Mr H's investments with that of the benchmark shown below and pay the difference between the fair value and the actual value of the investments. If the actual value is greater than the fair value, no compensation is payable. • Pay Mr H £500 for the upset caused by the complete loss of the investments. • Add any interest set out below to the compensation payable. Investment name Benchmark From ("start date") To ("end date") Additional interest C and R For half the investment: FTSE UK Private Investors Income Total Return Index; for the other half: average rate from fixed rate bonds Date of investment Date of my decision 8% simple per year from final decision to settlement (if not settled within 28 days of Gallium receiving Mr H's acceptance of my final decision) Income tax may be payable on any interest awarded. Actual value This means the actual amount paid from the investments at the end date. Fair value This is what the investments would have been worth at the end date had they produced a return using the benchmark. To arrive at the fair value when using the fixed rate bonds as the benchmark, Gallium should use the monthly average rate for one-year fixed-rate bonds as published by the Bank of England. The rate for each month is that shown as at the end of the previous month. Those rates should be applied to the investment on an annually compounded basis. Any withdrawal from the investments should be deducted from the fair value calculation at the point it was actually paid so it ceases to accrue any return in the calculation from that point on. Why is this remedy suitable? I have chosen this method of compensation because:

-- 18 of 19 --

• I think Mr H wanted some growth with a small risk to his capital. • The average rate for the fixed rate bonds would be a fair measure for someone who wanted to achieve a reasonable return without risk to his capital. • The FTSE UK Private Investors Income Total Return index (prior to 1 March 2017, the FTSE WMA Stock Market Income total return index) is a mix of diversified indices representing different asset classes, mainly UK equities and government bonds. It would be a fair measure for someone who was prepared to take some risk to get a higher return. I consider that Mr H's risk profile was in between, in the sense that he was prepared to take a small level of risk to attain his investment objectives. So, the 50/50 combination would reasonably put Mr H into that position. It does not mean that Mr H would have invested 50% of his money in a fixed rate bond and 50% in some kind of index tracker fund. Rather, I consider this a reasonable compromise that broadly reflects the sort of return Mr H could have obtained from investments suited to his objective and risk attitude. My final decision Where I uphold a complaint, I can make a money award requiring a financial business to pay compensation of up to £195,000, plus any interest and/or costs that I consider appropriate. If I consider that fair compensation exceeds £195,000, I may recommend that Gallium Fund Solutions Limited pays the balance. Determination and award: I uphold the complaint. I consider that fair compensation should be calculated as set out above. My decision is that Gallium Fund Solutions Limited should pay the amount produced by that calculation up to the maximum of £195,000 (including distress or inconvenience but excluding costs) plus any interest on that amount as set out above. Recommendation: If the amount produced by the calculation of fair compensation exceeds £195,000, I recommend that Gallium Fund Solutions Limited pays Mr H the balance plus any interest on the balance as set out above. The recommendation is not part of my determination or award Gallium Fund Solutions Limited doesn’t have to do what I recommend. It is unlikely that Mr H could accept a final decision and go to court to ask for the balance and the estate may want to get independent legal advice before deciding whether to accept my final decision. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr H to accept or reject my decision before 25 November 2025. John Pattinson Ombudsman

-- 19 of 19 --