The financial regulator has been accused of failing to respond to warnings about a doomed real estate investment scheme that was causing people to lose their life savings.
Around 2,000 people lost £46million when Blackmore Bond collapsed. It was alleged that a marketing firm used suspicious tactics to sell to ordinary people, not experienced investors.
The Financial Conduct Authority (FCA) did not intervene for two years.
The FCA said it was not their duty to intervene but MPs wanted an investigation.
Then-FCA boss Andrew Bailey – now head of the Bank of England – declined to comment.
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The bond was issued to invest money in UK property developments and the proceeds would reportedly pay back investors. Blackmore offered up to 10% interest payments per year.
Known as the mini-bond, the scheme was by law only to be sold to sophisticated investors, but was marketed to ordinary people.
The bond collapsed in 2020 amid allegations of suspicious selling tactics and improper payments. Direct warnings of the tactics used by a company marketing the Blackmore Bond were made to the FCA in 2017 and 2018.
An investigation for BBC Panorama uncovers evidence suggesting the FCA could have acted sooner – and may have tried to cover up the fact it didn’t.
Bipartisan MPs, including members of the Treasury Select Committee, have called for an investigation into FCA’s handling of the Blackmore bond.
Blackmore victim Paul Stevens, who was forced to retire from work due to an autoimmune condition called myasthenia gravis, invested his retirement pension into the fund when he was ill.
He is devastated by the loss and says it has made his illness worse.
“Like many others, we invested a significant amount of money and lost £40,000 as a family,” he said. “These plans have to stop and the FCA have to monitor them.”
His wife Jane said: “We feel like we’ve been flipped twice – first by Blackmore, then by FCA.”
Panorama: The billion-dollar savings scandal
An estimated billions of pounds are lost each year to failed investment plans. Panorama tells the story of one of them, during which member challenges the regulators who they believe have failed them
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Paul Carlier, a finance and banking expert, first reported his concerns about the marketing of the Blackmore Bond to the FCA in 2017.
His office at the time was next to the company charged with selling the bond. He overheard their activities and reported them for using illegal high-pressure sales tactics in the “boiler room.”
“[The sales people] have literally coldly called people and approached people with the intention of selling them a toxic or worthless investment product, including the Blackmore Bond,” he told the BBC Panorama.
Mr Carlier said the office walls are so thin that he can hear their intrusive techniques and their high fives and high fives when they manage to get someone to invest.
In 2018 he learned the distributor was still in operation and warned the FCA again, this time escalating the warning to the regulator’s then chief executive, Mr Bailey.
“And still more than £10m has been invested after he was aware of it, from the rest of 2018 into 2019,” said Mr Carlier. “It is amazing. I don’t know what else you could have done. I asked them to do it and they didn’t.”
Mr Bailey now holds a key position in the management of the national economy as Head of the Bank of England.
In total, £30m was invested in the Blackmore fund after the first warning in 2017.
When Mr Carlier again complained to the FCA about its inaction, the regulator sent him a draft reply – he believes erroneous – which contained a sentence which appeared to admit that the FCA was at fault. The line said, “However, I feel that the opportunity to consider and act on the information you have provided has been missed.”
But that line was crossed out, meaning Mr Carlier wasn’t supposed to see it. He was only able to do this because someone had left the “track changes” feature turned on, which showed a history of all changes made to the documents.
“Someone tried to hide it,” he told the BBC. “That’s the definition of a cover-up.”
The FCA has denied trying to cover up its actions and said the letter to Mr Carlier was amended because “further evidence came to light”.
Rep. Kevin Hollinrake, who sits on the Treasury Sub-Committee on Financial Services Regulations, is among those calling for fundamental reform of the regulator: “I’d like to say this is a one-off, but the reality is we’re seeing that a number of cases like this where FCA failed and they failed again here.”
He also criticized Mr Bailey and the FCA for their handling of other failed investment funds such as London Capital and Finance which collapsed in 2019 and resulted in 11,600 investors losing £237m.
This omission led to an investigation by former Court of Appeals judge Dame Elizabeth Gloster and compensation to the victims. MPs believe the same should happen in Blackmore’s case.
Mr Stevens and other Blackmore Bond investors explained how the fund’s collapse had affected them at a special session in June before MPs and members of the House of Lords.
Fellow Liberal Democrat Baroness Susan Kramer said an investigation was needed “to bring some justice to people who have essentially been duped in a fully public and, what should have been, regulated environment”.
The BBC Panorama film also follows other Blackmore investors who, believing they have been let down by authorities, set out to uncover Blackmore Bond-related evidence themselves.
The FCA and other authorities have taken no action against Blackmore directors Phillip Nunn and Patrick McCreesh.
The FCA has denied responsibility for Blackmore investors’ losses. It said it was reviewing the way the bond’s promotional material was approved, but said investors had been warned of the risks and needed to confirm they understood and could afford to lose the money.
Andrew Bailey declined to comment on his performance at FCA to Panorama.
Phillip Nunn, who has gone bankrupt in connection with a Blackmore Bond development, did not answer any of Panorama’s questions despite repeated requests.
Patrick McCreesh denied any wrongdoing and said Blackmore Bond was a potentially profitable, properly managed company. He said the risks of investments had been fully explained, vulnerable people had not been targeted and Blackmore had stopped working with the distributor, which had been reported to the FCA.
Mr McCreesh also admitted some business decisions were wrong and apologized. He said he has suffered difficulties and insists that as a director he has always acted correctly and in the best interests of the company.
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