The Financial Conduct Authority is facing a raft of criticism for its handling of the £46m Blackmore Bond collapse.
A BBC Panorama TV investigation broadcast last night (18 Aug) criticised the speed at which the regulator intervened and accused it of a cover-up.
About 2,000 investors lost about £46m when Blackmore Bond collapsed amid allegations of suspect sales tactics and inappropriate payments.
There are claims that the mini-bonds were marketed to average retail investors when, under current regulations, they should only be sold to sophisticated investors.
The BBC spoke to Paul Carlier, a financial services professional, who reported his concerns about the marketing of the Blackmore Bond to the FCA in 2017 while working next door to a company that was tasked with selling the bond.
He said that the salespeople were encouraging investors to self-classify as sophisticated investors to get around the rules, in a move reminiscent of the £237m London Capital & Finance mini-bond scandal. Both firms asked investors to put money into bonds which were used to fund property and other investment schemes.
Panorama also spoke to investors about the high-pressure sales techniques they were subject to, and how the collapse of the mini-bond has affected their lives.
MPs, including those on the Treasury Select Committee, have called for an inquiry into the FCA’s handling of the Blackmore Bond.
Property firm Blackmore was founded in Manchester in 2016 and issued ‘mini-bonds’ to retail investors. It asked for a minimum £5,000 investment. It is understood the firm was an unregulated business.
Money was used by Blackmore to invest in a string of residential property projects, including blocks of flats in Stevenage and other parts of the country.
Geoff Bouchier and Benjamin Wiles of Duff & Phelps were appointed joint administrators of Blackmore Bond plc on 22 April 2020.
Andy Agathangelou, founder of The Transparency Taskforce, said the Blackmore Bond saga should matter to Financial Planners because it is an example of, “how sloppy regulation is resulting in consumer outcomes that corrode trust and confidence in the system as a whole”.
He called on Financial Planners to contact the Taskforce to feed into discussions and debates it is leading.
The taskforce has arranged for a meeting in Parliament on 15 September to discuss the findings of the Panorama programme, and to kickstart discussions among MPs and the market “what it is going to take to fix the FCA” and the kind of responses that should be considered.
Mr Agathangelou said: “The BBC Panorama programme has confirmed what many stakeholders, including senior parliamentarians, have been thinking for some time. Which is that the FCA are consistently failing to provide an ‘appropriate degree of consumer protection’ despite that being one of the main objectives given to it by Parliament.
“The real tragedy in this case is that the FCA’s inability or unwillingness to deal with the hard evidence given to them by Paul Carlier, a highly credible whistleblower, meant that thousands of people lost life changing amounts of money to the culprits involved. Those bad actors could have, and should have, been taken out of the market by the FCA.
“I find it troubling that not only did the FCA fail to act when they could have; they were in effect given an open goal to shoot into, but they then tried to cover up their lack of action by concealing that their internal investigator who looked into the case came to the conclusion that they had most definitely missed an opportunity to act.”
An FCA spokesman told Financial Planning Today: “We sympathise with investors who lost money through Blackmore. However, it is not true that we failed to act. Our powers were limited as Blackmore was not a regulated firm and the issuing and distribution of mini-bonds isn’t a regulated activity. But we did take action where we could, including sharing intelligence with other agencies as early as 2017.
“We have continued to look at the financial promotions – the area we do have regulatory powers over. We shut down the website of a firm which was promoting the Blackmore products and in March 2019 took action that resulted in the regulated firm that had approved Blackmore’s latest financial promotions withdrawing its approval, preventing the further promotion of Blackmore’s mini bonds.”
Financial Planning Today understands there was no bar on Blackmore issuing issue bonds to relevant investors, provided the marketing material or financial promotions was ‘clear, fair and not misleading’ and approved by an FCA authorised firm. Blackmore financial promotion material is believed to have made clear investments were at risk and investors may lose their money as there was no FSCS protection. It is not clear if all investors understood this.
The FCA is believed to be still looking into the approval of financial promotions for the Blackmore bonds but it is understood the FCA shared its concerns with the City of London Police as early as 2017. The FCA has also liaised with the Insolvency Service which is not taking action against the directors of Blackmore.
It is believed the FCA has received a total of 36 complaints about Blackmore and is maintaining its stance that it did enough in relation to an unregulated business.
