The Financial Conduct Authority failed to act on warnings that a Manchester-based investment scheme used suspect techniques between 2016 and 2018 to sell to ordinary investors, says a banking expert.
Paul Carlier’s office was located next door to the marketing company that was hired to sell the Blackmore Bond. Through paper-thin walls, he overhead the company’s sales force celebrating successful sales with clapping and high fives, after using hard sale tactics on cold calls – much akin to the film Wall Street.
The “toxic or worthless investment product” should by law be sold only to investors with experience.
Blackmore Bond was a “mini-bond”, essentially a loan on which capital and interest are repaid over a period of time – unless the firm fails, in which case investors can lose all of their money.
The £46 million pound fund was raised to fund property developments through a number of Special Purpose Vehicles and offered an attractive 6.5-10% interest rate. The SPVs were separate companies set up to buy and develop the properties. The SPVs could also take out loans and prioritise the security of these loans ahead of that of the investors.
Eleven different property developments received investment from the fund, with around £9.3 million spent on management and marketing fees.
Mr Carlier reported his concerns to the Financial Conduct Authority (FCA) in 2017 and 2018, but the information was not acted upon for two years. In the meantime, 2,800 families lost £46 million on the collapse of Blackmore Bond.
When he complained to the FCA that no action had been taken, Mr Carlier received a draft response in which the words: “However, I consider there was a missed opportunity to reconsider and act on the intelligence you provided.” These words were struck through and he believed this was sent to him in error.
At the time, the FCA’s chief was Andrew Bailey who now heads the Bank of England. The fund received £30 million of investment after Mr Carlier’s first complaint, and he says that at least £10 million was invested in the failed bond after Mr Bailey became aware of the accusation.
In April 2019, when the FCA did finally act to make enquiries of the company’s business operations, new investment from the UK was halted but attempts were then made to source investments from overseas by marketing in Dubai, with further plans to raise capital in Tokyo and Hong Kong.
Blackmore Bond went into administration in April 2020, six months after it stopped making payments to investors. The bond’s administrators do not believe they will recover more than one million pounds of the £46 million invested.
As an unregulated firm, the FCA had limited powers over Blackmore and has said it took action “where we could”.
It is estimated that as much as one billion pounds of investors’ money is lost in failed investment schemes every year.