FCA decides not to take action against Blackmore Bond promoters

After 7,330 hours spent on investigations and more than 8,000 documents reviewed, the FCA has decided not to take enforcement action against the two firms which approved the financial promotions of Blackmore’s mini-bonds.

In a letter to Treasury select committee chairperson Harriett Baldwin, the City watchdog said it will not take any action against NCM Fund Services and Northern Provident Investments.

The letter stated: “After looking in forensic detail at the financial promotions, our investigation concluded that these were largely accurate in what they set out and contained very relevant risk warnings to consumers. Therefore, we will not be taking enforcement action against the firms.”

Blackmore Bond was set up in 2016 and, until 2018, ran an investment scheme where potential clients were offered mini-bonds with an attractive level of interest.

As these products, as well as Blackmore itself, were unregulated neither had to adhere to the FCA’s rules. 

Blackmore’s mini-bonds were promoted through information memoranda which were approved by FCA-authorised firms NCM and NPI.

I recognise that many will be disappointed that we have not found that evidence to the required legal thresholds in these investigations.Therese Chambers, FCA

The company raised millions of pounds from investors to fund property developments, but fell into administration in April 2020 after several months of rocky waters in which it failed to pay interest due to bondholders.

Some 2,000 investors were deprived of £46mn, much of which was never recovered.

The regulator said the memoranda contained various statements disclosing and warning consumers about the risks associated with the investment, the specific risks associated with Blackmore’s business model, and disclosed that costs of up to 20 per cent of overall bond subscriptions may be incurred as part of raising capital. 

They also stated that Blackmore’s mini-bonds could not be transferred to another investor. 

The FCA took action in 2019 which resulted in NPI withdrawing its approval of Blackmore’s financial promotions and in 2020 it told NPI to stop approving any further financial promotions for any firm.

The regulator undertook 7,330 hours on investigations and reviewed more than 8,000 documents but in both investigations it did not find evidence of sufficiently serious breaches relating to the approval of the financial promotions to justify taking enforcement action against either firm.

Writing to the committee, Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said: “Where serious misconduct is alleged, enforcement investigations are an invaluable tool. It is vital our investigations are conducted thoroughly and fairly, which means never prejudging the conclusion and taking action only where we have sufficient evidence to justify it.

“I recognise that many will be disappointed that we have not found that evidence to the required legal thresholds in these investigations. I hope, however, we have shown that we looked at all the available information and considered all potential avenues.”

NCM was responsible for approving the financial promotions for the Series 1, 2, 3 and 4 of the bonds issued by Blackmore, with approximately £36mn invested in these Series of bonds by some 2,000 investors.

Meanwhile NPI was responsible for approving financial promotions for Series 5 and 6 of the bonds issued by Blackmore, with approximately £5.8mn invested by some 500 investors.

The FCA has 26 complaints referring to Blackmore, which have been deferred since June 2021 while it undertook its enforcement investigations.

“These complainants allege we failed to protect investors,” Chambers said. “Now our enforcement investigations into NCM and NPI have concluded, our consideration of these complaints will restart. 

“We shall endeavour to complete our complaint investigations and provide a response to each complainant as soon as practicable. Complainants have been notified of this decision earlier today and will be kept regularly updated about the progress of our investigations until a decision has been made about each of the allegations raised.”

amy.austin@ft.com

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