An investment scheme which collapsed in 2020 had previously been given the green light to resume trading by the city regulator after a 12-month-investigation, the mouseinthecourt can exclusively report.
Some 2,800 members of the public lost the majority of their £46m investment, purportedly used to fund property developments, when the Blackmore Bond collapsed.
A parliamentary briefing paper states that Conservative MP Peter Gibson, Chair of the APPG on Personal Banking and Fairer Financial Service, said that the events at Blackmore Bond provided “irrefutable evidence” that the FCA was failing to regulate effectively.
The role of the FCA in the collapse was the subject of a BBC Panorama special in 2022 – see Blackmore Bond collapse: FCA failed to act before people lost life savings.
Paul Carlier, a finance and banking expert, told Panorama that he had concerns about the marketing of the Blackmore Bond, which he raised to the FCA in 2017, and then subsequently its then CEO Andrew Bailey the year after.
In a parliamentary debate in 2021 Peter Grant MP referenced Mr Carlier and told the commons:
“It was the end of 2019 before there was any obvious sign that the FCA had done anything. To be fair to it, when it acted, it did not hold back. It banned outright the sale of mini-bonds to the kinds of investors whom Blackmore Bond had been deliberately targeting. If the FCA had done that earlier, it could have prevented up to £26 million of the losses eventually suffered by Blackmore’s victims.“
According to court documents deployed in the London Capital & Finance trial, currently being heard at the High Court, it is claimed the FCA had actually ordered the firm to stop receiving money in 2017 before issuing a “a letter of no further action” 12-months later.
It is said the firm resumed raising funds from members of the public at that point.
These assertions were made in the witness statement of Paul James Careless, 48, of Coln Waters, Lechlade.
Mr Careless was a director of, and owned 90% of the shares, in Surge Financial Limited which was engaged by London Capital & Finance PLC to provide marketing and sales services. Both Careless and Surge are defendants in the LCF trial and deny any accusations of wrongdoing.
It is said Surge also “helped create a brand for Blackmore’s mini-bonds” and “worked with Blackmore from 2014 until 2019“.
Surge charged a 20% commission on the money raised for Blackmore.
In his witness statement Careless said “There was a hiatus of working with Blackmore in 2017 when the FCA stopped investment inflows whilst it investigated the propriety of the company“.
The cause of the investigation was said to be the desire of Blackmore Bond to become regulated. Careless said he “believed it was that application which started the FCA investigation into Blackmore.“
It is claimed Surge assisted “in the [FCA] investigation as a third-party provider of services which included disclosing a contract to the FCA“.
Information was also said to have been given to NCM Fund Services Limited. This was a third party who, as a regulated entity, was able to approve the financial promotions of Blackmore.
An FCA investigation into NCM concluded in 2023 with no action being taken.
In 2017 however Careless said he understood “that NCM explained to the regulator what Surge did, how much we charged, and who our clients were, including LCF.” This meant the FCA would have been aware of the 20% commission charged.
Careless wrote “it took 12 months until they said Blackmore could accept cash in-flows again.“
The application by Blackmore to become regulated, and the 12 month investigation into “the propriety of the company“, has not been revealed publicly before.
The BBC Panorama programme suggested that the FCA may have tried to cover up the fact it could have acted earlier. The FCA denied this at the time.
The FCA were heavily critised by Dame Gloster in her independent report into the collapse of LCF. Peter Gibson MP, as reported by the Transparency Task Force, said an independent report by Dame Gloster or someone “equally as robust” should be the next step for Blackmore.
With pertinent information drip feeding out this may be the only way that the 2,800 members of the public who invested will come to know what really happened.
We approached the FCA for comment. A spokesperson told us that “Blackmore was not authorised by the FCA. We do not give unregulated investment schemes the ‘green light’ – that is not our role.”
Without denying the claim that the regulator had shut down investment into the platform in 2017 for a period of 12 months before issuing a ‘letter of no further action’ we were also told:
“Blackmore was not authorised or supervised by the FCA, nor was its issuance of minibonds or loans a regulated activity for which Blackmore was required to be regulated by the FCA.
“The circumstances in which the FCA is able to investigate are prescribed in the Financial Services & Markets Act. In general, the FCA’s ability to intervene and take action in relation to unregulated conduct by unauthorised firms (such as an unregulated firm issuing mini-bonds) is limited.
“However, if concerns are raised about whether a company is carrying out regulated activity without authorisation, we will look at this. The nature of Blackmore’s bonds and the way Blackmore distributed them to investors meant that it was not carrying on a regulated activity.
“The FCA took action that resulted in Northern Provident Investments (“NPI”) (the regulated firm that had approved Blackmore’s latest financial promotions) withdrawing its approval of Blackmore’s financial promotions in March 2019, preventing the further promotion of Blackmore’s mini bonds.
“In addition, in February 2020 the FCA imposed requirements on NPI requiring it to cease approving any further financial promotions. As part of these requirements, NPI placed a statement on their website that they would no longer be offering this service.“
Mouse in the Court 