IPM liquidators report, FCA drops case despite £16m investor losses

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Independent Portfolio Managers facilitated two minibond investments which collapsed back in 2015 and 2016, Secured Energy Bonds and Providence Bonds, losing in the region of £8m each.

Independent Portfolio Managers was found ultimately responsible for the collapse of the unregulated investment scheme – ultimately passing the bill to the wider regulated financial industry and their customers – after the Financial Ombudsman Service found that Independent Portfolio Managers had misled investors through the literature it approved on the schemes’ behalf.

IPM was finished off by the zombie corpse of its former customer, after the administrators of Secured Energy Bonds put it into administration seeking £5.6 million.

The liquidators have now issued their second progress report.

It transpires that in 2016, IPM sold its minibonds business to a third party, a half-sister company whose majority owner was The Investors Partnership Limited, which also owned IPM. There is no sign that any consideration was paid for this business.

The liquidator’s lawyers contacted the purchaser, asking them what happened to the money. The purchaser cold-shouldered them.

Letters were sent to the purchaser and IPL requesting payment of the outstanding consideration. Weightmans LLP also requested further information from the Company directors regarding the Sale. The parties did not respond substantively.

£10,000 has been raised from a litigation funder to pursue the alleged missing consideration, with any proceeds to be split 50/50 with the liquidators and the funder.

The last bit of news from the report is that the FCA was carrying out an investigation into IPM’s misleading minibond promotions and its directors. The liquidators confirm that the FCA has closed its investigation and will not be taking any further action.

While it may have been responsible for “only” £15m in investor losses, a far cry from the collapse of a London Capital and Finance or even a Blackmore, the tale of Independent Portfolio Managers is significant due to the way it opened a new door for the general public to be put on the hook for unregulated investment schemes.

Both Providence Bonds and Secured Energy Bonds were unregulated investment schemes, with neither company authorised by the FCA. They needed an FCA-authorised firm to legally be allowed to promote their bonds to the public – which was IPM. When both schemes collapsed, the Financial Ombudsman initially refused to consider claims against IPM on the grounds that IPM worked for Providence and SEB, not the investors. The investors took legal advice and persuaded the FOS to reverse its stance.

IPM was inevitably found guilty of producing misleading literature and found liable for investors’ losses. As it had no funds whatsoever to meet those claims, investors’ claims were paid by the Financial Services Compensation Scheme, i.e. the general public via the levies on the regulated financial industry.

And so the precedent was set that as long as you could get an FCA-regulated company involved somewhere, the general public could be held liable for a collapsed investment scheme even if it was otherwise entirely unregulated.

But the FCA has apparently decided that there’s nothing more to be done and no case to answer. So that’s alright then.

6 thoughts on “IPM liquidators report, FCA drops case despite £16m investor losses

  1. Dolphin Trust/German Property Group had a section 21 sign-off from an FCA authorised IFA that has since gone out of business. I saw a copy of the document when conducting due diligence on Dolphin. As I understand it, this sign-off meant that the investment could be promoted to retail clients. I was wondering whether this might drag Dolphin into the orbit of the FSCS. That could get expensive.

  2. Pretty much every scheme has Section 21 sign off. While in theory it means every scheme might be covered by the FSCS it instead seems to be random, and hardly ever applied. I suspect the reason the FCA dropped the investigation was for fear of coming to any conclusions which might strengthen compensation claims.

  3. Section 21 sign off by a FCA authorised firm does not currently provide a route to a FSCS claim. This is because FSCS claims have to involve an authorised firm carrying out a regulated activity – ie an activity specified in the Regulated Activities Order. Approving a financial promotion is not currently an activity specified. It was because of other activities IPM were also carrying out that the claims were covered by the FSCS.

  4. What has happened to the Northern Powerhouse Developments scheme ???.

    Nothing on that and NO updates for months and months!.

    Very suspicious.

  5. Administrators generally report every six months. The last report for NPD was filed on 25 September for the period ending 15 August. So the next report would be expected in a month or two.

    I haven’t been covering the administration of NPD due to 1) it wasn’t reviewed here (it had already collapsed when Bond Review launched) 2) mainstream coverage in the nationals.

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