Conservative MP Peter Gibson is calling for an independent report into the Blackmore Bond scandal to investigate exactly what went wrong while criticising the regulator as not being “fit for purpose”.
Gibson, who chairs the all-party parliamentary group on Personal Banking and Fairer Financial Services, said the Blackmore Bond scandal provided further “irrefutable evidence” that the Financial Conduct Authority is failing to regulate effectively.
Blackmore Bond raised millions of pounds from investors to fund property developments between 2016 and 2018, but the company fell into administration in April last year owing £46m to investors after several months of rocky waters in which it failed to pay interest due to bondholders.
Gibson said an independent report by Dame Gloster - who recently published her review into the FCA’s regulation of London Capital & Finance (LCF) - or someone “equally as robust” should be the next step.
He also said parliament should be prepared to scrutinise more closely the work the FCA is doing saying it is currently “not functioning as parliament wishes”.
However, the FCA retorted that neither the product or the provider were regulated, therefore sat outside its remit, and it had taken action where it could.
Gibson said: “Parliament has given the Financial Conduct Authority clear statutory objectives which include protecting consumers from harm but there is mounting evidence that the regulator is consistently failing to deliver.
“It is obvious that the FCA is not for purpose. The real issue now is whether parliament can get it to perform satisfactorily through transformational reform; or whether its issues are so deep-rooted that a more brutal approach is necessary.”
A spokesperson at the regulator pointed out that Blackmore Bond nor the mini-bonds it sold were regulated by the FCA.
An FCA spokesperson said: “As a result of steps taken by the FCA, Northern Provident Investments, which had approved Blackmore’s financial promotions for communication to the public, withdrew its approval, preventing the promotion of the mini bonds.
“In a separate FCA intervention, Amyma Ltd’s website was taken down. Amyma Ltd no longer has permissions to conduct regulated activities."
The FCA added it continued to monitor these matters closely.
To give the FCA legal powers to take action against issuers of mini-bonds would require an amendment to existing legislation and it is therefore a matter for parliament.
The FCA spokesperson said: “In our mission [statement] we indicated we would be more likely to take action outside our perimeter where there may be fraud or the potential for the unregulated activity to undermine confidence in the financial system.
“In the case of fraud, this includes an authorised firm engaged in fraud, regardless of whether the fraud is carried out within its regulated activities or, in the case of an unauthorised firm, where the firm is carrying out regulated activities without approval and committing fraud.
“However, we do not have power to investigate a firm that is unauthorised and not carrying out any regulated activities, even if there are circumstances that suggest there may be fraud.”