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 most well 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.

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Were Basset & Gold bonds risk-free after all?

Basset and Gold logo

A couple of weeks ago West Ham sponsor Basset & Gold (reviewed here in December 2017) collapsed into administration.

So far so normal. Unregulated high risk investment fails, news at 11.

What was unusual about Basset & Gold is that back in 2018 at least, they were promoting their bonds while explicitly holding out that investors might be compensated by the FSCS if things went sour – on the basis of misselling.

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FSCS announces compensation for only 159 London Capital and Finance bondholders

London Capital & Finance logo

The hopes of most victims of FCA-authorised Ponzi scheme London Capital & Finance were dashed last week when the FSCS announced it would not compensate them on the basis of having received misleading advice.

It said that investors had merely been given incorrect information, which doesn't generate a liability that is covered by the FSCS' "protected business" rules.

That the FSCS has eventually taken this decision is disappointing for investors but ultimately not surprising. London Capital Finance was not authorised to give advice to retail investors, employed no qualified financial advisers, and its call centre staff were generally trained to avoid crossing the line from information to advice - as in any other non-advisory finance company. (Although some went off-piste and crossed the line into the "I'd tell my own mother to invest in this" school of advice.)

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FCA chief Andrew Bailey kicked upstairs

With the triumphant swagger of a county athlete who sees that he's the 1-10 favourite for tomorrow's race, drinks five pints of scrumpy in the pub the night before, and eventually staggers over the line an inch ahead of a 12-year-old farmer's son before vomiting into the trophy, FCA CEO Andrew Bailey has shrugged off the ongoing scandal of the FCA's failure to deal with unregulated investments and secured the appointment of Governor of the Bank of England.

Bailey must have been sweating a little as a succession of headlines about financial scandals old and new (minibonds, mortgage prisoners, vulture "restructuring" divisions) - with the FCA's conscious inaction as a constant theme - rolled through the presses as the Government deliberated its decision. But in the end, Bailey's "safe pair of hands" reputation won the day.

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Bond Review is 2 today


Today marks the second anniversary of Bond Review’s first ever article, our review of the now sadly notorious London Capital & Finance.

So far Bond Review’s two years have seen:

  • 90 reviews of high-risk unregulated investments promoted to the public
  • 190 further articles bringing you news on the progress of these investments (or lack of it)
  • 8 attempts at legal intimidation
  • Plus a further 2 attempts to remove Bond Review from Google search results by making defamation claims to Google (without making any attempt to contact us directly)
  • 0 court proceedings started
  • 1 fake DMCA takedown
  • 2 offers to buy the domain (and all its content) for an aggregate of £10,000 (to host a site reviewing James Bond films? sure guys)
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FCA acknowledges that minibond marketing ban may result in shortage of new money to pay off existing investors with

Following its announcement of a 12-month marketing ban on minibonds being marketed to the general public, the FCA has confirmed that it is well aware that this could lead to existing minibond investors losing their money.

In a 46-page document outlining the ban, more specifically outlining how the ban complies with UK anti-discrimination law, the FCA stated:

There may be indirect positive or negative effects on people with protected characteristics as they may be (i) existing investors in speculative illiquid securitiesor (ii) prospective investors. The former may experience harm if market disruption from our measures exacerbates poor performance of existing products and the financial position of issuers that are already struggling, especially if an issuer isreliant on being able to raise further capital from retail investors with new issues and this becomes more difficult.
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FCA announces 12 month ban on horses leaving through open stable door

The FCA dramatically announced yesterday that it would ban minibonds from being marketed to retail investors for a period of 12 months, starting on 1 January.

In addition, all marketing material approved by an authorised firm will have to declare any commissions paid to third parties (something we've already seen from Blackmore and The Capital Bridge in recent months).

During the temporary 12 month ban, the FCA will consult on more permanent measures.

What exactly this is supposed to achieve is difficult to see, until you remember that a decision on who will replace Mark Carney as the UK's top economic panjandrum is expected any day now. Former bookies' favourite Andrew Bailey is badly in need of something that makes it look like he has a grip. This is something.

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