Your personal decision to invest
A decision to invest is a personal decision by you and no responsibility for the consequences of that decision is accepted by Ethex Investment Club ("Ethex") or by any of its directors, agents, employees or other members. To invest through Ethex you need to understand the following important risks:
Losing all of your investment
Investment, whether in new or existing businesses, carries risks as well as the possibility of rewards. Accordingly, each investor should consider very carefully whether such investments are suitable in the light of your own personal circumstances and commitments and the financial resources available to each Investor. Ethex does not promise any return on investment nor that the value of any investment will be maintained. Don't invest unless you're prepared to lose all the money you invest.
Some of these investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential returns will be tax free.
Companies which raise finance on the Ethex platform will provide information such as their business plan and financial forecasts. Please be warned that these documents are not guarantees that the relevant company can achieve what it is hoping to do. Equally the information provided may state certain facts and statements, and again please be warned that Ethex is not responsible for checking the accuracy of these facts and statements (which may not always prove to be true or complete).
You may not receive your interest payments if a company underperforms and if an organisation fails then neither the company – nor Ethex – will pay back your investment.
The platform arranging this investment is not regulated by the FCA. Protection from the Financial Services Compensation Scheme (FSCS) only considers claims against failed regulated firms. The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm.
No established market – lack of liquidity
As an investor, you should be aware that even if the business you invest in is successful, it will likely take several years to get your money back.
Investments offered on the Ethex platform are not traded on a recognised stock exchange. There is no facility to sell bonds or shares on the Ethex platform.
Investors in community shares can request to withdraw their money from the issuing community benefit society but such requests may not be accepted. The board can only approve withdrawals if the society has sufficient cash reserves.
The need for diversification
Diversification by spreading your money across multiple investments will reduce risk. Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. The FCA would treat the types of investment offered on the Ethex platform as “high risk”.
Other risks that could affect the value of your investment
If your investment is in community shares, you should be aware that, under certain circumstances, the directors of a community benefit society have the power to write down the value of community shares.
If your investment is in ordinary shares (as opposed to community shares), the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares. These new shares could have additional rights that your shares do not have, which could further reduce your chances of getting a return on your investment.
Tax reliefs and savings may not materialise
Ethex does not guarantee that Enterprise Investment Scheme ("EIS") tax relief, SEED EIS tax relief or any other type of tax relief shall apply in respect of any investments made by you as an investor in companies via the Ethex platform. Tax-free status for IFISA is individual and subject to changes in legislation. Ethex recommends that you take your own tax advice on any investments which you make via the Ethex platform. Ethex does not make personal recommendations and does not promise that a particular investment will be suitable for the individual circumstances of an investor. Please note that just because a company has obtained an advance clearance from HMRC to confirm that it is for example an EIS qualifying company, it must be noted that the company can subsequently lose this status if it does not spend the investment in a prescribed way or it changes its business or share structure in a way which is contrary to the relevant tax rules. Furthermore, if the investee company goes to a successful exit event within three years (which you may have no control over) then the benefits of EIS tax relief will not apply. If the investee company is required by a majority of its investors to enter into a shareholders’ agreement (using the form prescribed by Ethex) then there are standard provisions to help ensure that any tax relief is maintained but it should be noted that this cannot be guaranteed as a complete safeguard in itself.
