--- title: "Lost money in a collapsed investment scheme: what the court looks at" url: https://professionalnegligenceclaimsolicitors.co.uk/lost-money-in-a-collapsed-investment-scheme-what-the-court-looks-at/ date: 2026-10-26 modified: 2026-10-26 lang: en author: "pncs" description: "A court looks at four things, in order, when you lose money in a collapsed investment scheme and sue the professional who advised on it: whether that professional owed you a duty, what the duty was meant to protect you against, whether their mistake caused your loss, and what you are left with once everything you received is set against what you paid in. A claim can fail at any one of those stages, and the fourth catches more investors than they expect." categories: - "Financial Negligence" - "Limitation periods" - "Litigation advice" - "Negligence Claim" - "Negligent Solicitor" - "Professional Negligence Cases" tags: - "collapsed investment scheme" - "collective investment scheme" - "financial adviser negligence" - "investment scheme claim" - "loss of investment" - "Ponzi scheme claim" - "Professional Negligence Claim" - "scope of duty" - "section 138D FSMA 2000" - "Section 14A Limitation Act 1980" - "section 14B Limitation Act 1980" - "section 213 Insolvency Act 1986" - "section 235 FSMA 2000" - "section 26 FSMA 2000" - "section 32 Limitation Act 1980" - "solicitor negligence" - "unauthorised investment scheme" image: https://professionalnegligenceclaimsolicitors.co.uk/wp-content/uploads/Lost-money-in-a-collapsed-investment-scheme-what-the-court-looks-at-1024x683.png word_count: 2440 --- # Lost money in a collapsed investment scheme: what the court looks at **A court looks at four things, in order, when you lose money in a collapsed investment scheme and sue the professional who advised on it: whether that professional owed you a duty, what the duty was meant to protect you against, whether their mistake caused your loss, and what you are left with once everything you received is set against what you paid in. A claim can fail at any one of those stages, and the fourth catches more investors than they expect.** Most people who come to us assume that a scheme which collapsed must have a negligent adviser standing behind it. The surprise is that the professional who made a mistake and the professional whose mistake caused your loss are sometimes different people, and that the strongest claim can turn out to need no proof of negligence at all. ### Want legal advice on the merits of your case? Your legal enquiry goes immediately to our PN litigation team in Middle Temple, London. We can't take on low value cases or give free legal advice - our minimum fee is £1750 +VAT for a conference with a solicitor and barrister. Call us on +442071830529. [Check My Case Now ✔](https://professionalnegligenceclaimsolicitors.co.uk/litigation-case-assessment-form/) ## Whose adviser was it? The first question is who the professional was acting for. If you took advice from an independent financial adviser or a solicitor and paid for it, you were the client and the duty ran to you. Our guide to [suing a financial adviser over an investment that went wrong](https://professionalnegligenceclaimsolicitors.co.uk/investment-gone-wrong-when-you-can-sue-a-financial-adviser-for-negligent-advice/) sets out the ordinary route, and our page on [negligence claims against financial advisers](https://lexlaw.co.uk/negligence-claims-against-financial-advisers/) looks at the same ground through mis-sold products. The position changes when the professional acted for the scheme itself. Solicitors who drew up the documents for the company that took in investors' money ordinarily owe their duty to that company and to nobody else. A non-client can sometimes sue, but it is the exception, and we explain when in our guidance on [who can bring a professional negligence claim](https://professionalnegligenceclaimsolicitors.co.uk/start-professional-negligence-claim-standing-sue-legal-solicitor-claimant-advice/). ## What the advice was meant to protect you from Even where a duty exists, the court asks what the advice covered. In Manchester Building Society v Grant Thornton UK LLP [2021] UKSC 20 the Supreme Court tied the extent of a professional's liability to the purpose for which the advice was given, which we discuss in our note on [the impact of that decision on professional negligence claims](https://professionalnegligenceclaimsolicitors.co.uk/the-impact-of-manchester-building-society-v-grant-thornton-on-the-law-of-professional-negligence/). On that approach, a solicitor who was asked only whether a scheme needed regulatory authorisation is unlikely to be answerable for the scheme's commercial failure. That is why the engagement letter, the written instructions and the advice note are read so closely. A narrow retainer narrows the claim, and a broad one can widen it. Our page on [scope of duty in professional negligence cases](https://professionalnegligenceclaimsolicitors.co.uk/scope-of-duty-in-professional-negligence-cases/) explains how the court draws the line. ## Would the money have gone in anyway? Causation is the third question. You have to show that, with correct advice, you would have acted differently: by not investing, by investing less, or by putting the money somewhere else. If the money would have gone into the scheme whatever the adviser said, or the loss would have happened in the same way on any version of the advice, the claim fails however poor the advice was. Our guide on [how to prove professional negligence](https://professionalnegligenceclaimsolicitors.co.uk/how-to-prove-professional-negligence-a-step-by-step-legal-guide/) sets out what a claimant must prove. What you were told matters more here than most investors realise. The brochure, the emails, the fact-find and the suitability report all go to what you relied on. Where an adviser recommended a high-risk scheme to someone who had said they wanted security, the mismatch is often the clearest evidence of what correct advice would have been. Our article on [financial adviser claims, losses, time limits and compensation](https://professionalnegligenceclaimsolicitors.co.uk/negligence-claims-against-financial-advisers-losses-time-limits-and-compensation/) explains the suitability standard that advisers must meet. ## Counting what came back The fourth question is the one that surprises people. The court compares where you are with where you would have been, and it brings into account what you received. Returns paid out, capital repaid and any later distribution all go on one side of the sum. Our explanation of [how compensation is calculated in a professional negligence claim](https://professionalnegligenceclaimsolicitors.co.uk/how-is-compensation-calculated-in-a-professional-negligence-claim/) covers the method in more detail. The same arithmetic has defeated claims brought by a scheme's own companies against the solicitors who advised them. A company that takes in a sum from investors and owes the same sum back has, on the usual comparison, lost nothing through the advice that let it do so. Investors are in a different position, because their money has gone and has not come back. Whether you have a claim depends on the first three questions, and our report on a [solicitor reprimanded for failing to explain the risks of off-plan property schemes](https://professionalnegligenceclaimsolicitors.co.uk/negligent-solicitor-conveyancer-failure-advise-on-risks-property-development-scheme-advice/) shows what a failure to explain risk looks like in practice. ## The claim that needs no negligence If the scheme was a collective investment scheme run by someone who was not authorised, section 26(1) of the Financial Services and Markets Act 2000 makes the agreement “unenforceable against the other party”. Section 26(2) then entitles that party to recover “any money or other property paid or transferred by him under the agreement” and “compensation for any loss sustained by him as a result of having parted with it”. Section 235(1) defines a collective investment scheme as “any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements ... to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property”. We examine how a statutory claim of this kind runs in practice in [our analysis of a High Court mis-selling claim under the Financial Services and Markets Act 2000](https://lexlaw.co.uk/solicitors-london/s150-s138d-fsma-2000-mis-selling-complex-financial-credit-suisse-derivatives-structured-products/). Where the person who advised you was an authorised firm, section 138D(2) provides that a contravention of an FCA rule “is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty”. If you have already complained to the ombudsman, our note on [the Financial Ombudsman Service and later court proceedings](https://lexlaw.co.uk/solicitors-london/financial-ombudsman-service-ruling-no-bar-to-court-proceeding/) deals with how the two interact. ## Going after the people who ran it The scheme's operators and directors are often the more natural defendants, even when little is left. Once the scheme company is in liquidation, section 213(2) of the Insolvency Act 1986 allows the court, on the liquidator's application, to declare that “any persons who were knowingly parties to the carrying on of the business” with intent to defraud creditors, or for any fraudulent purpose, “are to be liable to make such contributions (if any) to the company's assets as the court thinks proper”. The application belongs to the liquidator, so investors who are creditors need to know what to ask for. Our pages on [directors' personal liability when a company is in financial difficulty](https://windinguppetitionsolicitors.co.uk/risks-for-directors/), [post-insolvency claims against directors](https://windinguppetitionsolicitors.co.uk/post-insolvency-claims-against-directors/) and [creditor rights in UK insolvency](https://windinguppetitionsolicitors.co.uk/creditor-rights-in-uk-insolvency-an-all-encompassing-guide-for-2025/) cover that side. Speed matters, because assets move quickly once a scheme fails. A freezing order can stop a defendant dissipating assets before judgment, as we explain in our guide to [obtaining a freezing order](https://lexlaw.co.uk/urgent-injunctions-obtain-freezing-order-mareva-preserve-assets-litigation-solicitor-legal-advice/). ## When the adviser's firm has gone too Advisers fail alongside schemes. If the firm that advised you has closed, you may still have a route through its insurer, and we explain how that works in our guide to a [claim against an insolvent professional's insurer](https://professionalnegligenceclaimsolicitors.co.uk/insolvent-professional-claim-against-their-insurer/) and in our article on [what to do when your solicitor's firm has closed or collapsed](https://professionalnegligenceclaimsolicitors.co.uk/solicitors-firm-closed-or-collapsed-can-you-still-claim/). Where the money came out of a pension, our article on [pension transfer and SIPP advice gone wrong](https://professionalnegligenceclaimsolicitors.co.uk/pension-transfer-or-sipp-advice-gone-wrong-can-you-claim/) covers the extra rules. ## Is it the scheme or the tax that has gone wrong? People searching for help often run two different problems together. In one, the investment fails and your capital is lost. In the other, an arrangement sold as a tax saving works until HMRC challenges it, and the loss is a tax bill. The second is a tax dispute first, with HMRC as the opponent. Our pages on [disguised remuneration and the loan charge](https://taxdisputes.co.uk/disguised-remuneration-loan-charge-hmrc-tax-appeals-lawyers/) and on [objecting to an accelerated payment notice](https://taxdisputes.co.uk/2026/10/accelerated-payment-notice-can-you-object-to-an-apn/) deal with that side. A negligence claim against the person who recommended the scheme can sit behind either problem. We explain how it works for tax arrangements in our article on [negligent tax scheme advice](https://professionalnegligenceclaimsolicitors.co.uk/negligent-tax-scheme-advice-claims-explained/). ## The documents to gather first Before anyone can say which route is open, we need the paper: the brochure or information memorandum, the application form, any suitability report, the engagement letter and fee agreement, the correspondence, and the statements showing what you paid in and what you have had out. We also want to know who held the money, because a solicitor's client account or an escrow arrangement can bring a different professional into the picture. Our guidance on [what a letter before claim should contain](https://professionalnegligenceclaimsolicitors.co.uk/what-should-be-in-a-letter-before-claim-action-for-professional-negligence/) explains how that material is put to the other side. ## The time limits that apply Section 2 of the Limitation Act 1980 gives six years for an action founded on tort. Section 14A(4)(b) allows “three years from the starting date” if that period expires later, and under section 14A(5) the starting date is the earliest date on which you “first had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action”. Section 14B(1) then bars a negligence action “after the expiration of fifteen years” from the act or omission alleged to be negligent. Our page on [section 14A and limitation in negligence claims](https://professionalnegligenceclaimsolicitors.co.uk/limitation-periods-in-professional-negligence-section-14a-and-recent-developments-in-the-uk/) sets out how those periods are applied. Deliberate concealment changes the calculation. Under section 32(1)(b) the period does not begin “until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it”, and section 32(5) provides that sections 14A and 14B do not apply to an action where section 32(1)(b) applies, so the six-year period in section 2 runs from that later date instead. We would not advise anyone to rely on that argument without taking advice first, and our article on [time-barred compensation in professional negligence claims](https://professionalnegligenceclaimsolicitors.co.uk/time-barred-compensation-in-professional-negligence-claims/) explains what follows when a claim is out of time. ## How LEXLAW Can Help We act for investors and companies who have lost substantial sums on advice about investment schemes, and our first task is to work out which of the routes above is open, against whom, and at what cost and risk. We do not offer free legal advice or legal aid, and we generally take on substantial matters only. Our page on [financial negligence claims](https://professionalnegligenceclaimsolicitors.co.uk/financial-negligence-claim-solicitor/) describes the work we do. We are dual qualified solicitors and barristers, with chambers in Middle Temple next to the Royal Courts of Justice. We offer a fixed fee advice conference with both a solicitor and a barrister, and if you already have a lawyer but doubt the advice you have been given, our [second opinion service](https://professionalnegligenceclaimsolicitors.co.uk/second-opinion-legal-fixed-fee-new-representation-litigation-advice/) is designed for that. To start, complete our [case assessment form](https://professionalnegligenceclaimsolicitors.co.uk/litigation-case-assessment-form/). ### Want legal advice on the merits of your case? Your legal enquiry goes immediately to our PN litigation team in Middle Temple, London. We can't take on low value cases or give free legal advice - our minimum fee is £1750 +VAT for a conference with a solicitor and barrister. Call us on +442071830529. [Check My Case Now ✔](https://professionalnegligenceclaimsolicitors.co.uk/litigation-case-assessment-form/) ### FAQs Can I claim if the scheme turned out to be a Ponzi scheme? Possibly, but the collapse is not itself the wrong. The claim has to rest on a breach by someone who advised you, on a statutory right such as section 26(2) of the Financial Services and Markets Act 2000 where the scheme was unauthorised, or on dishonest involvement that a liquidator can pursue under section 213 of the Insolvency Act 1986. How long do I have to bring a claim against an adviser? Section 2 of the Limitation Act 1980 allows six years from when the cause of action accrued. Section 14A(4)(b) can give three years from the starting date if that expires later, and section 14B(1) bars a negligence action fifteen years after the act or omission alleged to be negligent. Section 32(5) disapplies sections 14A and 14B where deliberate concealment postpones the start under section 32(1)(b). Can I recover my money without proving negligence? Sometimes. If the arrangement was a collective investment scheme carried on by an unauthorised person, section 26(1) of the Financial Services and Markets Act 2000 makes the agreement unenforceable against you and section 26(2) entitles you to recover money paid and compensation for loss. Whether the other side can pay is a separate question. What is a collective investment scheme? Section 235(1) of the Financial Services and Markets Act 2000 defines it as arrangements with respect to property, including money, whose purpose or effect is to let participants share in profits or income from the property. Under section 235(2) participants must not have day-to-day control, and under section 235(3) the contributions must be pooled or the property managed as a whole by or for the operator. Can I sue the solicitor who advised the scheme company? Usually the solicitor's client was the company, so the duty ran to it. An investor can sue only if the facts show the solicitor assumed responsibility to investors, which is the exception, and the loss must fall within what the advice was meant to guard against. Can the people running the scheme be made to repay investors? Where the company is in liquidation, section 213(2) of the Insolvency Act 1986 lets the court, on the liquidator's application, order anyone knowingly party to fraudulent trading to contribute to the company's assets. The money goes into the company's assets and is shared among creditors under the insolvency rules, so it does not go straight to one investor. Does my adviser's insolvency end my claim? Not necessarily. The Third Parties (Rights against Insurers) Act 2010 can pass the professional's rights under their liability insurance to you, so you can pursue the insurer. You must still prove fault and loss, and the insurer can rely on the policy terms. Which losses does the court count? The court compares your position now with the position you would have been in had you received correct advice, and it gives credit for what you received back. Returns paid out and capital repaid reduce the claim, and the loss must also fall within the purpose of the advice the professional was engaged to give.