MPs and peers are demanding an inquiry into the collapse of a property investment scheme that lost devastated families their life savings.
There are calls for a ‘root-and-branch’ probe into Blackmore Bond, which squandered around £45million of investors’ cash when it fell into administration in April 2020.
The Financial Conduct Authority is accused of failing to act on warnings about the doomed scheme before it folded.
This has thrown fresh scrutiny on the FCA‘s then chief executive Andrew Bailey, who is now the under-pressure Governor of the Bank of England.
In a BBC Panorama programme, due to be aired tonight, it is claimed the FCA could have acted earlier over Blackmore Bond – and may have tried to cover up the fact it did not.
Blackmore was set up in July 2016 and raised money to fund property developments by issuing ‘mini-bonds’, which promised interest rates of between 6.5 per cent and 10 per cent on investors’ money.
In total, Blackmore invested £46million from around 2,800 investors into 11 separate property developments, with around £9million spent on marketing and management fees.
But, in October 2019, Blackmore stopped making payments to bondholders and six months later fell into administration.
Bondholders have been told by administrators that they are not likely to recover more than £1million of the £46million invested, meaning most will lose almost all of their money.
The FCA today insisted it was ‘not true’ that it failed to act over Blackmore and said it took ‘action where we could’.
However, the watchdog admitted its powers were ‘limited’ due to Blackmore not being a ‘regulated firm’.
The collapse of Blackmore has thrown fresh scrutiny on the FCA’s then chief executive Andrew Bailey, who is now the under-pressure Governor of the Bank of England
The FCA is accused of failing to act on warnings about the doomed scheme before it folded, which led to devastated families losing their life savings
Among those affected by the scheme’s collapse was Paul Stevens, pictured on the BBC Panorama programme with his wife Jane, who invested his ill-health retirement benefit into the fund
Among those affected by the scheme’s collapse was Paul Stevens, who was forced to retire from work due to an auto-immune disease and who invested his ill-health retirement benefit into the fund.
‘Like many others, we invested a significant amount of money and, as a family, we lost £40,000,’ he told BBC Panorama.
‘These schemes must stop and the FCA needs to police them.’
His wife, Jane, said: ‘We feel as if we’ve been turned over twice – first by Blackmore, then by the FCA.’
According to the BBC Panorama programme – which includes allegations about Blackmore’s ‘pushy’ sales tactics and marketing – concerns were raised about the scheme with the FCA in both 2017 and 2018.
Paul Carlier, a finance and banking expert, had an office next door to the company that was tasked with selling the bond.
He told Panorama they were ‘literally cold-calling people and approaching people with an intent to sell them a toxic or worthless investment product, including the Blackmore Bond’.
Mr Carlier said he escalated his first warning to the FCA about the scheme, in 2017, to Mr Bailey in 2018.
‘I entrusted them to deal with it, and they didn’t,’ he said of the watchdog.
He also revealed that a draft response to him from the FCA – sent by error – included an admission that there was ‘a missed opportunity’ to act over the scheme.
The FCA acknowledged that the language in a final response to Mr Carlier ‘differed from the draft’ but said this was due to ‘further investigation and evidence coming to light’.
Politicians featured on the Panorama programme meeting with Blackmore victims have backed demands for an inquiry into the scheme’s collapse.
In December 2020, an independent report into the FCA’s regulation of another collapsed mini-bond issuer, London Capital & Finance, led to the establishment of a compensation scheme for bondholders.
That report was authored by Dame Elizabeth Gloster, with there now being calls for a similar probe to be set up into Blackmore.
Tory MP Kevin Hollinrake is among those backing demands for an inquiry into the scheme’s collapse, after he met with Blackmore victims
Tory MP Kevin Hollinrake, a member of the House of Commons’ Treasury Committee, said: ‘I’d like to say this is a one-off case. But the reality is we have seen a succession of cases like this where the FCA has failed. And it’s failed here again.
‘We do need a root-and-branch look at this. So I support another investigation on the lines of the Elizabeth Gloster report on London Capital & Finance, which was hugely critical of the FCA and individuals within the FCA – including Andrew Bailey.’
Baroness Susan Kramer, a Liberal Democrat peer, said: ‘You’ve got to have an equivalent to the Dame Gloster report to deal with the Blackmore issue, to deliver some justice for the people who were essentially scammed in an entirely public and what should have been regulated setting.’
Mr Bailey left his role at the FCA in March 2020 when he became the Governor of the Bank of England.
He has recently come under fire for failing to control soaring inflation rates, which is the Bank’s priority.
The Bank recently said it expects inflation to reach an eye-watering 13.3 per cent in October, more than six times above its target rate of two per cent.
Both Mr Bailey and the Bank of England declined to comment when approached by MailOnline about the BBC Panorama programme.
A spokeswoman for the FCA told MailOnline: ‘We sympathise with investors who lost money through Blackmore. However, it is not true that we failed to act.
‘Our powers were limited as Blackmore was not a regulated firm and the issuing and distribution of mini-bonds isn’t a regulated activity.
‘But we did take action where we could, including sharing intelligence with other agencies as early as 2017.
‘We have continued to look at the financial promotions – the area we do have regulatory powers over.
‘We shut down the website of a firm which was promoting the Blackmore products and in March 2019 took action that resulted in the regulated firm that had approved Blackmore’s latest financial promotions withdrawing its approval, preventing the further promotion of Blackmore’s mini bonds.’