Blackmore Global under investigation by Isle of Man regulators

Blackmore logo 2019

Blackmore Global, the sister investment scheme to the UK minibond that collapsed with £46 million of potential losses, is being investigated for potentially running an illegal collective investment scheme.

Blackmore Global was established a few years before Blackmore Bonds. It is, on the surface, an unregulated investment scheme consisting of a closed-ended company registered in the Isle of Man.

The BBC revealed in 2018 that a number of UK pension investors had been missold in transferring their pension funds into Blackmore Global, an inherently high risk unregulated investment. The linked article has been suppressed by Google – along with its BBC source – due to legal action by Blackmore.

The articles remain suppressed despite the fact that Blackmore has never proved or even attempted to prove in a court of law that any part of my article is untrue, and the same applies (so far as I am aware) to the BBC’s.

Investors in Blackmore Global were locked in to the fund for 10 years. Blackmore Global was incorporated in September 2013 and the earliest any Blackmore Global investors will be able to cash out of the fund is therefore September 2023.

The current status of investments in Blackmore Global is unknown as it does not publish regular independently audited accounts.

After seven and a half years of operation, the Isle of Man Financial Services Authority has now accused Blackmore Global of running an unregulated investment scheme.

The IOMFSA went public with its accusations because it “considers it is desirable in the public interest to publish the information”.

The IOMFSA’s accusation is based on the following:

8.1 When Blackmore was established it availed of an exemption provided in the Collective Investment Schemes (Definition) Order 2008 (the “Order”). The relevant exemption in the Order was at paragraph 4: “…and no other body corporate other than an open-ended investment company, shall be regarded as constituting a collective investment scheme.

8.4 The Offering Document (and Article 12 of the Articles of Association) provides that Blackmore may only repurchase shares in exceptional circumstances subject to strict criteria:

“12.2 Unless shares are expressed to be redeemable, the Company may only purchase, redeem or otherwise acquire them pursuant to –

(a) an offer to all shareholders which if accepted would leave the relative rights of the Shareholders unaffected and which affords each shareholder a period of not less than 14 days within which to accept the offer; or

(b) an offer to one or more shareholders to which all shareholders have consented in writing; or

(c) an offer to one or more shareholders in respect of which the Directors have passed

a resolution stating that in their opinion the transaction benefits the remaining shareholders and the terms of the offer are fair and reasonable to the company and the remaining shareholders”.

Or to translate from Manks Gaelic:

Neither my sister nor I operate a collective investment scheme. We like them, but we don’t operate them. We’re from the Isle of Man.

Blackmore Global was only able to operate as an unregulated, unlisted investment scheme on the basis it was a closed-ended scheme, meaning that to join an existing investor had to sell you their shares, and to exit you had to find a new investor to sell you their shares. Isle of Man securities law recognises that this is inherently less likely to be flogged to the public than an open-ended company which can generate new shares for any investor who wants to join and extinguish them for any investor who wants to cash out.

It is technically possible for a closed-ended investment company to buy its own shares off the shareholders using cash in the company. Do this often enough, however, and you start to behave like an open-ended fund.

The IOMFSA alleges this is what Blackmore Global was doing.

8.5 The Authority became aware that between March 2015 and May 2019 there had been regular and substantial redemptions made out of Blackmore.

8.6 The Authority does not consider that the number and nature of the redemptions processed and made were exceptional in nature, or that Blackmore was able to evidence that the transactions benefited the remaining shareholders and that the terms of offers were fair and reasonable to the remaining shareholders.

The extent to which these regular and substantial redemptions made out of Blackmore has to do with investors like those featured in the BBC investigation being allowed to cash out prior to the ten-year lock-in period ending is unknown. In part due to its own lack of disclosure.

Also unknown as yet is whether any of these redemptions were made by Blackmore directors or controlling persons.

The IOMFSA is now considering “appropriate next steps”.

FCA warned by police about Blackmore 45 times before bond collapse

Blackmore logo 2019

A Freedom of Information request made by The Telegraph has revealed that the City of London police warned the Financial Conduct Authority 45 times over the activities of Blackmore Bond starting in 2018.

According to a freedom of information (FOI) request submitted by The Telegraph, the City of London Police, which is the national police lead for fraud, first alerted the FCA to events at mini-bond provider Blackmore in 2018, 18 months before it eventually failed.

It subsequently highlighted problems at the company 44 times prior to its demise in April 2020. The majority of those warnings occurred in February and March of that year.

The FCA was first warned about Blackmore in 2017 by independent consultant and whistleblower Paul Carlier. It eventually stopped Blackmore from taking in new money from the UK in April 2019, having been stung into action by the collapse of London Capital and Finance a few months earlier. Blackmore’s subsequent attempts to attract money from overseas went nowhere.

The regulator has claimed that it did not receive any warnings from the City of London Police until February 2020 (when Blackmore Bonds had already collapsed). Why it did not receive the dozens of earlier warnings is unclear as yet.

The City of London Police’s warnings to the FCA followed a total of 71 reports of “alleged fraud” relating to Blackmore, none of which came from the FCA.

The misplaced / ignored warnings raise a number of important questions which go beyond the usual “why didn’t the FCA do anything“::

  • Who made the original reports to City of London Police and why? It’s unlikely to have been Blackmore Bond investors, as in 2018, Blackmore was making all its interest payments on time.
  • The FOI red flags referred to both “Blackmore” and “Blackmore Global”. Blackmore Global is a controversial Isle of Man unregulated investment scheme, run by the same directors as Blackmore Bonds, which, as reported by the BBC, received the pension funds of a number of UK investors. Blackmore Global does not publish audited accounts or performance reports and investors in the fund have struggled to ascertain what their investment is now worth. Did some or all of the 71 fraud reports submitted to City of London Police relate to the Blackmore Global unregulated offshore fund rather than the Blackmore Bonds minibond scheme?
  • What did City of London Police expect the FCA to do? The reports were always going to bounce off the FCA’s “regulatory perimeter” (i.e. institutional culture of ‘not our problem’) and the most likely organisation to make further enquiries into allegations of fraud was either the City of London Police itself or the Serious Fraud Office.
  • Why were none of the concerns reported to the police and the FCA made public until now? When a high risk unregulated scheme is being promoted to the public, the right of investors to be informed trumps the right of the investment scheme not to have its reputation damaged.

Inevitably, an MP (Gavin Newlands, SNP) has called for Blackmore investors to be bailed out by the general public, on the grounds that the FCA failed them in the same way as LCF investors. The Treasury said that a compensation scheme for Blackmore investors is not being planned.

Blackmore Bond investors facing total losses

Blackmore logo 2019

The latest update from the Blackmore Bond administrators reveals that investors may be facing total or near-total losses.

Potential gross recoveries have been revised from £5 million down to less than £1 million, due to the difficulty of selling properties / building sites as a forced seller during the pandemic, and the fact that Blackmore borrowed money from expensive short-term lenders whose security over the properties outranks the bondholders.

With the administrators’ costs and legal costs already standing at over £1 million, which also stand ahead of Blackmore’s ordinary investors in the queue, this means bondholders are facing total losses.

The prospect of total losses stands in stark contrast to Blackmore‘s marketing material which claimed the bonds provided “simple, fixed-rate returns with income certainty” and were “fully insured against insolvency through our comprehensive Capital Protection Scheme”.

This “Capital Protection Scheme” consisted of insurance policies arranged through Ion and Northern Surety Company (also referred to as Northernlights Surety). Whether these will actually provide any recompense to investors is unclear. The administrators note that they are not responsible for claims on these, as this is in the hands of Blackmore’s Security Trustee, Oak Fund Services (Guernsey).

Blackmore raised £46 million via its unregulated bonds which were sold to the public by the same marketing company as London Capital and Finance.

Blackmore: director says only £5m left, FCA’s “Operation Dump It On Other Countries’ Doorsteps” is dismal failure

Blackmore logo 2019

Administrators Duff and Phelps have released their initial report into collapsed property minibond scheme Blackmore.

Of £46 million raised from investors, director Patrick McCreesh has estimated in a Statement of Affairs that less than £5 million is likely to be realised to pay them back.

Investors’ money was moved to a series of Special Purpose Vehicles which then invested in property developments. These SPVs borrowed more money from other sources, such as short-term bridging finance providers, whose loans would have been on very high interest rates.

In March 2019 Blackmore stated that “Our business model is entirely on track and current return on capital employed averages 54 per cent”. How it went so quickly from being “entirely on track” and generating 54% ROCE, to being unable to pay interest six months later and collapsing with (at least) 90% losses is unclear.

The £5 million that McCreesh estimates can be realised from Blackmore is less than the £9.2 million that would have been paid to their marketers Surge in commission. Surge ran Blackmore’s back office and marketing efforts, the same job they carried out for London Capital and Finance. (Blackmore’s December 2017 accounts suggested that Surge were paid 20% commission on virtually all the funds raised by Blackmore.)

Overseas efforts fail

In the aftermath of the collapse of London Capital and Finance, the FCA “made enquiries directly of the Company in relation to its business operations” in March 2019.

Blackmore subsequently lost its “Section 21 signoff” – the approval of its financial promotions by an FCA regulated firm that allowed its bonds to be marketed within the UK. In April 2019 it closed to all new investment from the UK, and, in an attempt to source funds from overseas, opened an office in Dubai, with further offices planned for Tokyo and Hong Kong.

To be clear, there was nothing to legally stop Blackmore from finding another FCA-regulated firm to sign off its promotions and continue sourcing investment from within the UK – provided its bonds were promoted only to high-net-worth and sophisticated investors (as they always should have been).

The inescapable conclusion is that Blackmore’s decision to stop taking money from all UK investors was to keep the FCA off their backs. Meanwhile the FCA crossed its fingers and hoped that overseas investors would somehow invest enough in Blackmore to avoid another scandal involving tens of millions of losses to UK investors.

I’m not seeing another reason to refuse to market to UK investors, even when it is perfectly legal and compliant to do so, while still taking money from overseas investors.

How did that go? The administrator’s report notes that “further minibonds totalling £2,331,340” were issued to overseas investors – so about 5% of the amount that had been raised before Blackmore closed to UK investment.

There is no indication that Blackmore had had any contact from the FCA prior to March 2019, despite the FCA being well aware that Blackmore Bonds were being systematically missold to retail investors since at least March 2017.

“Capital guarantee” schemes

The administrators note that Blackmore’s bonds were supposed to be covered by insurance policies in the event of default, from Ion Insurance Group S.A. for Series 1 bonds and Northern Surety Company, SRL for subsequent bonds.

Whether any funds will be recovered from these policies is described as “uncertain”. There is a long history of unregulated investments being marketed as being covered by insurance, which for one reason or another doesn’t pay out.


FCA knew about misselling of Blackmore Bonds three years before collapse

Blackmore logo 2019

The collapse of Blackmore Bonds has once again laid bare the Financial Conduct Authority’s institutional contempt for its objective of consumer protection.

Paul Carlier, an independent consultant known for blowing the whistle on dodgy FX dealings at Lloyds, contacted the FCA on March 2017 to warn them that Blackmore Bonds’ high-risk investments were being missold by an unregulated introducer named Amyma.

They occupy the office next to us and the glass partition means we hear everything they say and do.

In a nutshell Boiler Room. […] They are pushing all manner of these bonds to pensioners citing them as “guaranteed by one of the worlds biggest banks”. […] “Everything is guaranteed” “I’ll put you down as a sophisticated investor”.

[…] And their phone rarely ever rings and assume from the fact that they have to ask people’s names that cold calling in some form is involved.

Carlier received a reply from the FCA to say that his report would be passed to “the relevant areas to consider”. Carlier replied

Please stress to whomever you pass the Amyma info to that pensioners are clearly being targeted.

It’s not just a Boiler shop issue but activity related to misleading pensioners, vulnerable under the new rules.

Carlier continued to press the FCA on the subject over the following years, but the FCA refused to engage with him regarding Blackmore Bond or Amyma.

Carlier was not the only one to warn the FCA long before Blackmore’s collapse. I can reveal that I also contacted the FCA to warn them of the same thing, a year after Carlier did, in early 2018.

I highlighted to the FCA a) the misleading way Blackmore was advertising its bond via social media, with terms like “Income Certainty” “Knowing how to invest your savings doesn’t have to be difficult” etc. And b) how Trustpilot laid bare how many Blackmore investors clearly did not qualify as high-net-worth or sophisticated.

Like Carlier, I never heard anything back beyond a boilerplate acknowledgement.

So what did the FCA do?

Amyma has also marketed Asset Life plc (now insolvent) and Westway Holdings (trading but in default of its obligations to investors).

The only action taken by the FCA in regard to Amyma that is in the public domain was to give it FCA authorisation, via the firm Equity for Growth (Securities) Limited. Amyma Ltd was an Appointed Representative of EfGS from July 2018 to September 2019. This means that the FCA did not authorise Amyma directly; EfGS was ultimately responsible for Amyma’s contact during that period. Why Amyma lost its appointed rep status in 2019 is not publicly known.

In 2019 Blackmore rowed back on its promotional activity following the collapse of London Capital and Finance, first closing to new business and then re-opening to non-UK investment only (despite there being no legal prohibition on it accepting money from within the UK).

However, no action was actually taken by the FCA against Blackmore that is in the public domain. Which given that Blackmore’s bonds were promoted to the general public is the same thing as no action being taken.

Regardless of what happened in the year leading up to Blackmore’s collapse, Blackmore was able to continue misleadingly marketing its bonds via its own social media and via third parties for years after the FCA was made aware of it.

Institutional contempt

Former FCA head and now Bank of England governor Andrew Bailey admitted in June 2019 that the FCA was aware of the systematic misselling of LCF bonds long before it intervened in December 2018. That it did the same with Blackmore is not a surprise.

Why does the FCA focus so much of its attention on issues such as the minutiae of “worst regulation ever” Mifid II, finger-wagging over easy access interest rates, hanging out with Arnold Schwarzenegger and chin-wagging conferences about excellent sheep; while over a billion pounds is lost on the UK on systematically missold unregulated investments, with far-reaching consequences to the wider economy and society?

This is not a rhetorical question.

The tea within the financial industry is that the FCA takes the view that banks underpaying their depositors by £1 billion is more important than people losing £500 million worth of life savings in scams or unregulated investments.

This comes from second-hand reports of private conversations with FCA officials, and the FCA will never verify this in public, so readers can take it or leave it. Personally I take it, because it is a model which consistently explains the pattern of FCA behaviour over a period of many years.

This “£1 billion of uncompetitive interest rates is more important than £500m of lost life savings” credo is of course complete nonsense.

Studies have consistently shown that the stress and misery caused by losing your life savings is comparable to that of losing a limb or a loved one.

By contrast, customers being overcharged for insurance or receiving 0.5%pa less than the best-buy rate causes precisely no misery whatsoever. If it caused them misery they would switch.

If the police took this attitude to crime prevention and prosecution, shoplifting would be priortised over murder on the grounds that £100 stolen from a shop is more important than £50 worth of clothing getting covered in the victim’s blood.

The idea that some banks paying less interest than others is more important than scams because the first involves more money, is a classic example of starting from the conclusion you want and then finding a reason to justify it.

The reason the FCA pays virtually no attention to the loss of hundreds of millions worth of savings in inappriorate high risk unregulated investments is because they view it as beneath them.

The FCA would rather be a vicar than a sheriff. Regulated businesses serve the FCA tea and biscuits in nice London offices and nod attentively when it lectures them about the font they use to disclose their charges. The FCA would rather eat their biscuits than drive up to grotty offices in Bournemouth and Bolton to serve cease and desist notices. But the latter is where action is needed.

We have gone way beyond “Why doesn’t the FCA do something?” The answer to that is the same as when the frog asked the scorpion “What did you do that for?” The question is now “When will Parliament do something about the FCA?”

The FCA has now been leaderless for four months and counting.

The last time the FCA was under interim leadership, London Capital and Finance obtained FCA authorisation, allowing the marketing of its bonds to go into overdrive.

I was tempted to conclude this article “Round and round we go” and call it a morning, but the reality is that the cycle can be broken. We also know how it can be broken.All investment security offerings registered with the FCA, as has been the case in the USA for almost a century, and a top-down reform of the FCA to bring about real and urgently needed cultural change.

It is now up to the Government to choose whether to break the cycle or throw future pensioners and other vulnerable consumers on the bonfire.

Footnote – Philip Nunn speaks – or doesn’t

Blackmore director and co-owner Philip Nunn remains active on Twitter, but appears to be pretending his most famous company doesn’t exist.

Since Blackmore collapsed into administration, Nunn has not had a word to say to his stricken investors, instead restricting himself to offering his services for raising investment in the cryptocurrency industry, and banal nonsense along the lines of 2018 – Everyone is a Bitcoin seller. 2020 – Everyone is a PPE seller.”

Since October 2018 (as far back as I could go), Nunn’s Twitter feed barely mentions Blackmore at all.

Also notable is that in a puff piece in 2018, Philip Nunn was still being introduced as “CEO of Wealth Chain Group and The Blackmore Group”. However, by 2019 Nunn was being mentioned in puff pieces only as CEO of Wealth Chain Group, with no mention of Blackmore.

This is odd because Wealth Chain Group is an obscure one-man band. (A one-man band that owes money to Blackmore companies, according to its 2018 accounts; its 2019 accounts are overdue.)

If you were the owner of two businesses, one a £45 million property firm, and the other an obscure one-man band, why wouldn’t you identify yourself first and foremost as head honcho of the property firm? Especially in 2019, long before the property firm collapsed, when it was still telling everyone that it was on doing great and on course to meet all payments to investors?

Patrick McCreesh by contrast has not updated his Twitter feed since May 2018. Until that point his Twitter activity mostly consisted of retweeted and self-penned Blackmore PR announcements.

The FCA is probably hoping that everyone forgets Blackmore existed as well.

Breaking: Blackmore Bonds collapses into administration

Blackmore logo 2019

After months of delayed and missing payments and failure to file legally-required accounts, Blackmore Bonds is finally to be taken out back and put out of investors’ misery.

Administrators Duff and Phelps have been appointed by a security trustee (presumably Oak Fund Services (Guernsey) Limited), according to IFA trade rag Money Marketing. The news is little surprise as D&P were originally approached by Blackmore investors in January, seeking answers after months of delayed and missing interest payments.

Duff and Phelps are experienced in winding up investment schemes; they are currently raking over the ashes of collapsed care home scheme Carlauren and were also administrators of one of the biggest of the previous wave of investment scheme collapses, the Connaught Income Fund which collapsed in 2012 causing £118m in investor losses.

I reviewed Blackmore’s bonds in December 2017 and concluded that, despite Blackmore’s claiming to offer “Simple, fixed-rate returns with income certainty” and a “Capital Protection Scheme” backed by an obscure American insurer, the bonds were extremely high risk with an inherent possibility of up to 100% loss.

A year in the collapse of an unregulated investment scheme

In March 2019 Blackmore claimed to be “entirely on track” with return on capital employed rates of 54%.

Our business model is entirely on track and current return on capital employed averages 54 per cent. This has been verified by reputable independent surveying professionals. The first bond maturities are due at the end of 2020 and will be paid in full.

However, at around the same time it amended its website to include a warning that if new investments into Blackmore dried up, existing investors might lose some or all of their money.

There can be no guarantee of investor appetite for the Bonds to the extent predicted by the Company or, indeed, at all. In such circumstances investors may lose some or all of their investment.

Only four months later in July 2019 Blackmore defaulted on its first interest payments, although that money was eventually paid. From October onwards payments to investors dried up entirely.

Blackmore’s bonds were promoted by Surge Financial, the same marketing company as London Capital & Finance which collapsed at the beginning of last year. Blackmore paid 20% of investors’ money to Surge as commission. (Money Marketing says 25% but a belated amendment to Blackmore’s website, and its own accounts, suggest 20%.)

When London Capital and Finance collapsed in early 2019, Blackmore briefly replaced LCF on promotional websites linked to the Surge group, which coincided with a spike in traffic to Blackmore’s website.

Blackmore briefly claimed on its website to be the proud sponsor of the Kent Police rugby team, but withdrew that claim in early 2018. Kent Police said in 2018 that they agreed to accept sponsorship from Surge Financial, but withdrew from the sponsorship arrangement after Surge asked them to change the sponsor to Blackmore instead.

Blackmore also runs an offshore investment fund, Blackmore Global, which has been the subject of complaints from investors whose pensions were transferred into the fund. How the fund is performing is unknown as Blackmore Global does not release performance updates to the public (and, as an unregulated private business, has no obligation to).

Administrator Geoff Bouchier says

There has been concern regarding the company’s affairs for several months so it will be a relief for bondholders that independent professionals have now been appointed to the company.

“Relief” is not how I would describe it, but the announcement of the administration will at least begin the process of closure for Blackmore investors.

How do I get my money back from Blackmore?

If you were advised to invest in Blackmore Bonds by an FCA-regulated adviser, or invested via an FCA-regulated SIPP company without regulated advice, you may be able to recover your money by making a formal complaint to the FCA-regulated company.

If the company refuses to provide compensation, the complaint can be taken to the Financial Ombudsman, which can order compensation up to a defined limit. If the company is unable to pay, you would be covered by the Financial Services Compensation Scheme up to £85,000 per person (for defaults after 1 April 2019).

Investors should avoid Claims Management Companies (CMCs) as they are unnecessary (the FOS and FSCS process is slow but straightforward), often have a lower success rate than direct complaints, and charge eye-watering fees.

If the above does not apply the standard procedure is to write off the investment and treat any recovery as a bonus.

If you invested in Blackmore Bonds, you should be on your guard against anyone contacting you and telling you that they can recover your money. It is highly likely that you will be targeted by fraud recovery fraud. If anyone asks you to pay “legal fees” or “liquidation fees” to release your money it is almost certainly a scam.

Blackmore investors approach restructuring and insolvency specialist

Blackmore logo 2019

According to the Times, a group of Blackmore Bond investors has approached restructuring and insolvency specialist Duff & Phelps in the hope of getting answers about their investment.

Blackmore has been in default of interest payments since October. It has told investors recently that payments will be made “imminently” once it has sold some of its properties.

Investors have asked Blackmore to appoint Duff & Phelps to carry out a review of Blackmore’s business. Blackmore has declined.

Regular readers may be familiar with the name Duff & Phelps as they have been appointed administrators of the Carlauren Group, a £76 million unregulated care home investment scheme which collapsed last year under allegations of Ponzi fraud.

As it stands Blackmore is in default of its loans from investors but is not insolvent or in administration.

That a group of investors are speaking to a restructuring and insolvency practitioner is a serious development. Even if Duff & Phelps are appointed in an advisory capacity, they will not come cheap.

And if they had a magic solution that would allow Blackmore to turnaround its business and start generating the 15% per year returns it requires to make its interest payments to investors after accounting for the cost of commission paid to its introducers, they wouldn’t be in the restructuring and insolvency business. If they knew how to generate 15% per year returns, every business owner in the country would be beating down their door.

Anyway, as it stands Blackmore insists that it doesn’t need any magic solution, and that it will get back on track with interest payments as soon as it has sold some property.

Having been rebuffed by Blackmore, the investor group which contacted Duff & Phelps now has to decide whether to use their missed interest payments to take Blackmore to court and force the issue, or leave Blackmore directors Philip Nunn and Patrick McCreesh in charge and cross their fingers.

Blackmore Bonds – the important questions answered

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Troubled minibond provider Blackmore hit the news again over the Christmas period after missing a third consecutive interest payment and falling overdue with its annual accounts.

Rather than regurgitate the last two articles, we’ll examine the important issues in depth.

Q: Why has Blackmore stopped paying interest?

A: Blackmore has defaulted on three quarterly interest payments, starting in August. August’s was eventually paid a week late; Blackmore blamed a clerical error.

September and December’s payments remain unpaid. Blackmore has now blamed Brexit and delays in selling property.

Q: Why is there so much media interest?

A: An obscure small business (Blackmore raised over £25 million; a £100 million company in the UK is considered micro-cap) being unable to pay its debts on time is normally a “dog bites man” story, as anyone who has lent money or extended credit to a small business knows.

Blackmore however has excited media interest due to unfortunate parallels between itself and London Capital Finance. Both companies paid commissions of c. 20% to Surge Financial. After LCF was shut down by the FCA, Blackmore briefly replaced LCF on comparison sites run by the Surge group of companies.

As discussed in our original December 2017 review, investment in Blackmore was only suitable for high-net-worth and sophisticated investors who could swallow the inherent risks of lending their money, and for whom it made sense to loan a small part of their money to unlisted small businesses. It is clear from Blackmore’s deteriorating Trustpilot rating that a significant number of Blackmore investors were not in fact mentally prepared for the inherent risk of default.

This is not surprising given that Blackmore used the same marketing channels as LCF, which was also promoted to unsophisticated investors.

Q: Where are the accounts?

A: As a PLC, Blackmore should have filed its accounts for December 2018 by June 2019. It has twice used a loophole in the Companies Act to extend the deadline, and now appears to have missed it entirely. Companies House shows the due date as 27 December which was over a week ago.

There are two obvious reasons why it didn’t use the loophole a third time: 1) Blackmore has grown a conscience about using the loophole 2) nobody in the company cares enough anymore to submit the filing necessary to use the loophole.

Q: What does this mean for Blackmore’s attempt to raise money outside the UK?

A: In April 2019 Blackmore briefly closed to new business. When it reopened it had stopped accepting money from within the UK. There remains no legal prohibition on it accepting investment from UK investors (though there are restrictions on how its unregulated bonds can be promoted).

In May Blackmore opened an office in Dubai with plans for further offices in Hong Kong and Tokyo.

The Emirates, Hong Kong and Japan all have one thing in common; they don’t use the Roman alphabet, meaning investors in those countries Googling for Blackmore are less likely to see negative publicity in the UK.

How much investment Blackmore has taken in from outside the UK is unknown, partly due to its failure to submit accounts in a timely fashion.

Q: What is the Financial Conduct Authority doing?

A: Probably nothing. Or nothing visible to the public, which in relation to an investment formerly promoted to the public is as good as the same thing.

Over the last five years the FCA has consistently taken the view that unregulated investments are not its problem (despite its statutory objectives to preserve confidence in the markets and protect consumers). After the departure of Andrew Bailey it is currently rudderless.

Although the FCA intervened in London Capital and Finance over its misleading promotions, which was swiftly followed by the collapse of the scheme, its powers to intervene in Blackmore are more restricted as Blackmore is not an FCA-related company.

At present the FCA appears content to let things run their course.

The consistent failure of the UK to bring its securities laws out of the 1920s, and of the FCA to enforce the requirement for companies relying on “high net worth / sophisticated investor” exemptions to prove that their investors qualify as such, means companies like Blackmore are free to raise money from UK investors without oversight from the FCA or meaningful disclosure requirements.

This is not a scandal as scandals have an element of the unexpected. This is the expected and intended consequence of deliberate regulatory and government policy.

Q: Are Blackmore investors likely to get their money back?

A: Due to the lack of public information on Blackmore’s finances it is impossible to say which will happen from the outside.

Blackmore’s bonds had a minimum term of 3 years and the first capital repayments fall due in 2020.

Small companies can and do recover from temporary cashflow issues. It is also an inherent risk that a loan to a small company results in a 100% loss. The fact that Blackmore’s loans were promoted as “secured loans” does not change that as there is an inherent risk that the security is not enough to cover the administrator’s fees.

Long term, Blackmore needs to generate returns of up to 16% per year after all overheads and costs in order to successfully repay its investors (the return required to sustain 20% upfront commission and 7.9% per year to the investor over three years). The risk that it fails is inherently extremely high.

Q: What can investors do?

A: If you loan money to a company and they stop paying it back, there are only two options: 1) Write it off, forget about it and treat any return as an unexpected bonus 2) Consult a solicitor and run the high risk of throwing good money after bad. All other options are more stressful and less productive versions of 1) and 2).

Investors who were advised to invest in Blackmore by an FCA-regulated financial advisor or used an FCA-reguated SIPP provider may have recourse to the Financial Ombudsman and Financial Services Compensation Scheme.

If investors are contacted out of the blue by people claiming they want to buy their investment in Blackmore, it is probably a scam.

Breaking: Blackmore to delay interest again

Blackmore logo 2019

Blackmore Bonds is to delay its already-late October interest payment again, The Times reports.

Days before its October interest payment fell due, Blackmore announced that payment would be unilaterally delayed until November. That deadline has now also been missed.

Watching Blackmore’s interest payments has turned into a Groundhog-Day-esque ritual for those interested in the unregulated investment scene.

It is safe to say that never in financial history has there been this much interest over whether a £25m-odd company can scrape together around half a million pounds to pay quarterly interest.

That a relatively obscure micro-cap property company’s debts, which should only be of interest to a handful of sophisticated private investors, should end up in the national newspapers, emphasises the absurd extent to which the unregulated sector has been allowed to spread into the mainstream.

Movers and shakers news

In other Blackmore news, a Companies House filing shows that Blackmore Chairman Kenneth “Buzz” West jumped ship from Blackmore Bond plc on 1 September, though at time of writing he remains on the board of a number of other Blackmore companies.

West was until recently also non-executive Chairman of Kingswood Group, a regulated wealth management company, but resigned in April according to the FCA register.

West now appears to be taking an interest in the growing legal cannabis sector as Chair of Cannagrow Biosciences.

Consternation as Blackmore delays interest again

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Blackmore Bonds has delayed paying quarterly interest on its bonds for a second time.

Blackmore managing director Patrick McCreesh

Investors received an email from Blackmore director Patrick McCreesh saying that the payment due in two days’ time would be delayed until 29th November.

Blackmore’s last interest payment at the end of July was also delayed by a few weeks. In that case Blackmore blamed a “clerical error”. This time around Blackmore has blamed “circumstances outside their control”. At least they didn’t try to blame Brexit.*

Blackmore’s business model, including the 20% commissions paid from investor funds to Surge and other introducers, requires it to generate returns of up to 15% per year to meet its obligations to investors. As recently as March Blackmore claimed its business was “entirely on track”.

As inherently high risk unregulated investments with a risk of total loss, Blackmore’s bonds should only have been promoted to sophisticated or high net worth investors who could afford to invest no more than 5-10% of their free assets, and shrug off the loss if Blackmore defaulted.

Unfortunately, judging by the Trustpilot reviews, this hasn’t been the case for some Blackmore investors.

After the very late interest payment last time this comes as a shock and has only given us 3 days to prepare.
Why were we not notified earlier. I was depending on this interest payment being on time.

At time of writing the Blackmore Bonds website is down, possibly due to excess demand. Investors report that the Blackmore app which allowed investors to view their investments is also down.

Blackmore has twice put off filing annual accounts, blaming the resignation of its auditor. At the beginning of October it claimed its accounts were “almost ready” and will be signed off soon.

*Correction 29.10.19: Oh dear, they did blame Brexit. Money Marketing, who obtained a copy of the full email, notes that McCreesh’s opening stated “2019 has been a very challenging year for businesses in all sectors, with the uncertainty around Brexit slowing down markets. The property market is no exception…”