What went wrong at Blackmore Bond?

Investors stopped receiving payments in October 2019 and Blackmore Bond went into administration in April 2020. It was revealed that Blackmore Bond and the SPV had also taken out expensive loans to raise additional funds, and large interest payments had to be made. In addition, many of the property developments were never built and those that were, were of poor quality.

This combination of factors meant that the value of investments made was significantly lowered and administrators Duff & Phelps (now Kroll) told bondholders that they might only recover a fraction of their initial investments, if anything at all.

Blackmore Bond did have a guarantee scheme in place, to provide protection of up to £75,000 to investors should the company become insolvent. Claims were made against the guarantors, Ion and Northern Surety Company, however by the time of Blackmore Bond’s liquidation in April 2021, none had been paid.

To make matters worse, mini-bond issuers do not need to be authorised by City watchdog, the Financial Conduct Authority (FCA), meaning investors would not be covered by the Financial Services Compensation Scheme (FSCS) – the independent, Government-backed lifeboat scheme put in place to protect and compensate customers when financial firms fail. Nor could they ask the Financial Ombudsman Service (FOS), an independent body that investigates complaints between financial institutions and their customers, to resolve their dispute. More doors closed to out-of-pocket investors.

While a mini-bond issuer doesn’t need to be FCA regulated, any company promoting their product does, under what is called the Financial Promotions Regime. Marketing agency Amyma Ltd took on this role – they were an ‘appointed representative’ of another FCA-authorised firm, Northern Provident Investments – but later faced criticism for their pushy sales tactics and misleading claims. The operation became the focus of a BBC Panorama documentary in August last year and a topic of discussion at Government level.

A Government All-Party Parliamentary Group (APPG) on Personal Banking and Fairer Financial Service (PBFFS) looked into the collapse of Blackmore Bond in early 2021 and called for an independent report into what went wrong. They also called for wider regulatory reform, saying that the FCA was failing to operate effectively.

It has been reported that the City of London police warned the FCA about potential fraud in Blackmore Bond as far back as 2016, sending a total of 45 Action Fraud reports, with the majority sent in February 2020. Labour politician, Siobhain McDonagh has criticised the FCA for failing to act quickly enough. These criticisms refer to a draft letter, believed to be written by the FCA to a whistle-blower, which was never sent. In it, the FCA said it “missed an opportunity to act” in relation to the mini-bonds scandal.

The FCA has defended its behaviour, saying that they had no authority to act, as Blackmore Bond and the mini-bonds they issued were both unregulated, but that they did share intelligence with the police as early as 2017. Unfortunately, it appears that human error meant all the relevant information was not shared with the police at that time. The FCA did take some action in September 2019 which led to Amyma Ltd losing its authorised representative status, Northern Providence Investments withdrawing its approval of the mini bond’s promotion and Amyma’s website being taken down.

The FCA has banned the marketing of all mini-bonds to retail (individual, non-professional) investors since the beginning of 2020, given concerns that they did not fully understand the risks involved and may not be able to afford the potential financial losses. Blackmore Bond was not the only firm involved in the sale of mini-bonds. Northern Provident Investments, Bassett & Gold subsidiary B&G Finance Ltd and London Capital & Finance have all failed, making headline news and leaving investors seeking financial compensation.

If you were one of the 2,200 people affected by the Blackmore Bond collapse, the position still remains unclear. The FCA has already indicated that the promotion of Blackmore Bonds was accurate and made the risks clear to investors.

However, there is still hope that a route to compensation exists if the bonds were not sold to the right type of investor, with the necessary financial knowledge and monetary backing. The role of the insurers, Northern Surety Company, is also being examined as a potential avenue of redress for investors.

Commenting on recent developments, Sarah Spruce, Head of TLW Solicitors’ Financial Mis-selling team, said:

“The position is complex and evolving. The TLW team are exploring a range of options to help anyone who has lost out having made investments in Blackmore, and some of the other funds linked with Northern Provident Investments. We would advise anyone with concerns related to these investments to get in touch for a no-obligation discussion and explore the next steps.”

• Barbican Investments
•  Azurite ISA
• Blackmore Bond
• Fluid Trust ISA
• Absolute ISA
• Acorn ISA Bond
• Choices ISA
• Convivia Capital’s Convivia ISA
• FREE Wind ISA
• Knightsbridge Capital Bond
• Northbridge ISA
• Ziphouse IFISA
• Access Commercial bonds
• Astute Capital’s IFISA
• Satchi Holdings’ ISA-eligible bond
• Haletone/Shetland Space Centre IFISA-eligible bond
• Synthesis Analytics UK IFISA-eligible bond
• Summit Resorts & Development Ltd IFISA-eligible bond
• The Electric Vehicle Company IFISA-eligible bond
• Leonne International IFISA-eligible bond

The Financial Services Compensation Scheme (FSCS) continues to investigate Northern Provident Investments and has started to assess sample claims against the firm. If the claims route is opened to individuals, this may be a way for investors to seek compensation.