Financial Conduct Authority  

FCA looking at Blackmore Bond scandal in same 'forensic detail' as LCF

FCA looking at Blackmore Bond scandal in same 'forensic detail' as LCF

The Financial Conduct Authority said it is looking at the Blackmore Bond scandal in the same “forensic detail” as it has done with the London Capital & Finance scandal. 

Speaking at the regulator's annual general meeting (AGM) today (October 12), the FCA’s executive director of enforcement and market oversight, Mark Steward said the regulator’s focus in relation to the bond scandal has been focused on the way in which those financial promotions operated.

The Manchester-based mini-bond scheme collapsed in April 2020. It had promised investors interest payments of up to 10 per cent a year from a property portfolio it was supposed to build with the money.

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Around 2,000 investors lost £46mn, despite being told their money was guaranteed up to £75,000 through an insurance scheme. One investor lost his entire military pension, while another family lost £40,000.

The company running the scheme was not, however, regulated by the FCA, and no individuals involved in the scandal were regulated by the City watchdog either.

Steward said the insurer is a legitimate insurer and the FCA understands that claims have been made on behalf of Blackmore bonds against that insurance policy and at the moment, the insurer has not accepted those claims.

He explained that the insurance component was an important part of what the Blackmore bond proposition offered to consumers and argued that between the liquidator and the insurer, there is more to play out, but “there is nothing untoward about the insurance policy itself”.

Earlier this year, a BBC Panorama documentary about the Blackmore Bond scandal raised questions over the parameters of the FCA’s powers. 

Discussing the FCA’s role, he said the area in which the FCA is focused is whether the FCA authorised firms promoting the bonds carried out the relevant checks.

The way in which the legislation operates Blackboard Bonds, an unregulated firm which is able to issue many bonds without being regulated, is outside the FCA’s perimeter.

“But the marketing and promotion of those bonds could only happen through the agency of FCA authorised firms who approved those financial promotions that were issued by Blackmore Bonds,” he explained.

Steward said it looked into whether the two FCA authorised firms undertake correct due diligence and check out what was being offered.

“Did they make sure that what was being provided to consumers the information has been provided to consumers in those promotions, did they make sure that information was accurate, was clear, not not misleading,” he said. 

“Our work in relation to this is virtually complete. But at this stage, it does look as though those financial promotions were largely accurate in what they set out and contained. Very relevant risk warnings for consumers.”

Steward said the FCA is doing additional work around this as the proposition for Blackmore could not be given to any retail consumer.

The consumer would have to be a qualifying consumer to buy Blackmore bonds largely because of the higher risks involved in dealing with this kind of investment.