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FCA's Mark Steward - "Nothing to see here". (And no, he wasn't trying to be funny)
At The FCA APM this week the FCA's Head of Enforcement made various representations and statements. Among them a variety of representations in respect to Blackmore Bond. I am in the process of submitting a number of Freedom Of Information Requests (FOI) to The FCA in response to those representations made.
I include below one I sent today in all of its detail. It is specific to Mr Steward's representations about Blackmore Bond marketing material including this Investment Brochure produced by Blackmore Bond in 2018. A copy of which you can download for yourself here.
I have included in the FOI request a comparison of Mr Steward's and the FCA's official representations, against what is in the pages this document, and asked for information to explain quite how those representations can possibly have been reached.
You can read the document and my positions for yourself.
To the FCA data team,
(TSC and Transparency Taskforce copied) Further to representations made by Mark Steward yesterday at the FCA APM in respect to ‘Blackmore Bond’ please find below the next of several FOI requests in respect to those Blackmore Bond representations.
And to be clear, and given the dishonest FOIA responses from the FCA recently, I am publishing this entire FOI request as a Blog article, so that everyone can see exactly what information has been requested of you, and each response will be published.
I should remind you that the FCA should be able to answer each and every request below very quickly, given that all are specific to emphatic representations made by Mr Steward this week, none of which he would be in a position to make unless he and The FCA had all of the information requested. BLACKMORE BOND FOI REQUEST 5 - During The FCA APM Mark Steward made the following statement: MARK STEWARD 2022 FCA APM - RE: BLACKMORE BOND:
“….the marketing and promotion of those bonds could only happen through the agency of FCA authorised firms who approved those financial promotions that were issued by Blackmore bonds. So, our attention if you like, has been firmly focused on the way in which those financial promotions really operated....Did the FCA authorised firms that were two of them were involved in those promotions? Did they undertake proper due diligence? Did they check out what was being offered? Did they make sure that what was being provided to consumers--The information that's been provided to consumers in those promotions did they make sure that information was was accurate, was clear, not not misleading and didn't contain any material omissions and also properly advised consumers about all the risks that we're involved in those promotions. now at this stage Our work in relation to this is is virtually complete, but at this stage, it does look as though those financial promotions were largely accurate in what they set out and contained Very relevant risk warnings for consumers.” 1. Mr Steward is emphatic when claiming that the promotional material approved by the FCA regulated firms was accurate, was clear, not misleading…. was appropriate and contained ‘VERY’ relevant risk warnings for consumers. 2. HOWEVER, I refer you to the attached document ‘Blackmore [Bond] Series 4. This is one of the promotional documents to which Mr Steward refers. Any review of this document cannot produce the findings that Mr Steward presented to the APM and the public this week, referred to above. 3. On the opening pages of the document we find the following:
"Before you subscribe for the Blackmore Bond you should make sure that you fully understand the risks that are set out in this Document in Part II and you should determine whether the investment is suitable for you on the basis of all the information contained herein. Please be aware that in the event that the Company becomes insolvent, you may lose some or all of your investment. Prospective Investors should consider carefully whether an investment in the Bonds is suitable for them in light of their personal circumstances. Investment in a bond offering of this nature, being an illiquid investment, is speculative, involving a degree of risk." 3.1. Firstly, I refer you to the numerous references confirming this as an ‘Investment’, contrary to Mr Steward’s representations this week that these consumers provided an ‘Unsecured Loan’ to Blackmore Bond and NOT an Investment. I refer you to my previous FOI request on that issue.
FOIA ELEMENT A) ‘Guaranteed Investment' 3.2. Indeed, there are risk warnings here and elsewhere within the document. HOWEVER, these are essentially ‘overridden’ by the frequent representations made within the document as to the investment being secured against assets and also guaranteed by insurance. Particularly, but not excluisvely the following content: PAGE 9 - [When referring to the ‘GUARANTEED’ annual interest of 6.5% in the 3 year bond, and 8.5% in the 5 year bond] "Insured by a Capital Protection Scheme *” PAGE 12 - In answer to the heading question of: "How secure is Blackmore Bond Plc? Multi-layered security reduces risk. Capital protection is enhanced by a robust security scheme.”
PAGE 13 - THE WHOLE OF THIS PAGE: "How do we do this? [Protect or guarantee the Capital] 1. Investors are granted legal charge (which is held by the Security Trustee on Bondholders’ behalf) over all land and property assets owned by Blackmore Bond and any Subsidiary. In some cases, this will be a first charge and where there is lending it may rank behind the lending bank. 2.This charge would be enforced by the Security Trustee, International Administration Group (IAG), an independent specialist appointed to protect investor interests. Since IAG was founded in 2000, it has administered over 400 funds and currently has over £12 billion in assets under administration. 3. In addition, the Company takes a “belt and braces approach”, whereby if the land and property assets are not sufficient to repay investor capital in full, investors have a Capital Protection Scheme in place which works like an insurance policy. In the event of the Company’s insolvency, the policy will repay each investor up to the total amount of their investment. The policy is administered by Northernlight Surety Company, SRL (NLS). Established in 2004, NLS has balance sheet assets in excess of $115 million. To be clear here, this statement states it ‘will’ repay each investor up to the total of their investment. It does not say ‘might’ or ‘should’. It is definitive and emphatic.
PAGE 14 - In respect to ’Security’. Security The Bonds will be secured by a debenture over the assets of the Company and any Subsidiary, to be overseen by the Security Trustee. The security documentation (called the Omnibus Charge and Guarantee) includes the ability for the Company to raise further funds (in circumstances where the Directors consider it sensible, prudent and appropriate to do so to seek to maximise the deployment of investors’ capital) from banks. Where bank funding is in place, Bondholders’ security will rank behind that of the bank (i.e. the bank must be repaid before Bondholders). If the Company were to fail, the value of the Company’s assets may not be enough to provide Bondholders with a full return of their capital. A full description of the risks can be found in Part II of this Document. To seek to protect Bondholders in such circumstances, the Directors have put in place security protection. In the case of any shortfall or default in repaying Bondholders at the time redemption is due, a Capital Protection Scheme is in place to seek to ensure that all Bondholders are (in the absence of any fraud of the Directors) repaid any shortfall in the amount they recover from the Company (in the event of its liquidation or insolvent administration) up to the full amount of the original capital invested. This Capital Protection Scheme is provided by Northernlight Surety Company, SRL.
Page 16 and into Page 17 "The full investment value of the Bonds will be secured against the underlying assets of the Company by way of an Omnibus Guarantee and Charge against the Company and any Subsidiary, and a Capital Protection Scheme is in place to protect each Bondholder’s investment."
PAGE 24 "The Company has decided to increase its commitment to the safeguarding of Investors’ interests (as well as broadening the marketability of the Bonds) by having the Bonds secured against the Company’s underlying assets (by way of an omnibus guarantee and charge)" PAGE 30 - The entire page is devoted to the headings ‘Security Trustee’ and ‘Security & Capital Protection Scheme’. However, some of the highlights in terms of guaranteeing risk etc. are as follows: "The Security Trustee, pursuant to a Security Trust Deed, will enter into, on behalf of all Bondholders of the Company, an omnibus guarantee and charge which will grant a fixed and floating charge over the Company’s and the Subsidiary’s assets. All properties will be charged by way of legal mortgage pursuant to the terms of the omnibus guarantee and charge. The security will be granted to the Security Trustee, and the Security Trustee will hold the security on trust and will enforce it, if necessary, for the benefit of Bondholders. In practice, in the event of the Company defaulting on repayments to investors, the Security Trustee will step in to take charge of the Company’s assets, ensuring that all Bondholders’ interests are protected and they are paid out in priority from other creditors using the Company’s net assets." NOTE: Note only representations as to investors money being guaranteed, but this is actually contradictory to other representations in the document [adn even later on the same page] and small print where lenders interests are said to be ahead of investors. "To seek to protect Bondholders in such circumstances, the Directors have put in place protection for Bondholders such that in the case of any shortfall or default in repaying Bondholders at the time redemption is due, the Capital Protection Scheme will step in and ensure that investors are repaid (in the absence of any fraud on the part of the Company’s Directors, and subject to the Directors complying with certain strategic limits on investment which serve to further diversify and de-risk the Company’s investment portfolio) any shortfall in the amount they recover from the Company (in the event of its insolvency) for the full amount of their capital invested." "4. if there is a shortfall to Bondholders, the Capital Protection Scheme would meet the shortfall to repay Bondholders’ capital in full." PAGE 32 - "5. There is a Capital Protection Scheme in place to protect your investment funds.” PAGE 34 - Under the Heading of ‘FAQ’s’ [First FAQ….] "How secure is the investment? We have a multi-layered security scheme in place for our Investors’ protection. We aim to protect your capital in the following ways:
Investors have a legal charge over the assets of Blackmore Bond. In the event of business insolvency the sale of these assets goes towards paying back our Bondholders’ capital. Please note that where there is bank borrowing, the Bondholders will rank second in order of priority over the charge.
Should the sale of these assets not be enough to pay our Investors back in full then our Capital Protection Scheme, which acts like an insurance policy, comes into play and covers Investors for any shortfall there may be, to repay their capital in full.
An independent Security Trustee – International Administration Group – will monitor and control the security, acting solely in the interests of Bondholders and not for the Company." Directly beneath that they include this line: "Please note that as with any investment your capital is at risk." It is wholly reasonable by the time a prospective investor has got to this part of the document, such are the overwhelming and repeated assurances and guarantees, to believe that the ‘risks’ being referred to are risks that exist only BEFORE the Capital Protection or Capital Guarantee kicks in or being triggered. I.E. The risks being referred to are the risks that the Capital Protection or Capital Guarantee are in place to entirely offset. INDEED, when we come to the pages devoted to ‘Risk Factors’ and it extends to four pages, 36-39, and that includes all manner of risks, AFTER it has listed these risks it then includes the following: "The Bonds will be secured by an omnibus guarantee and charge over the assets of the Company and its Subsidiaries to be overseen by the Security Trustee. The security documentation includes the ability for the Company to raise further funds (in the situation that the Directors feel it sensible, prudent and appropriate to do so) from banks. In such a situation, Bondholders’ security will then rank behind that of the bank (i.e. the lending bank must be repaid before Bondholders), including in the event that the Company were to fail. If the Company were to fail, the value of the Company’s assets may not be enough to provide Bondholders with a full return of their capital or any overdue interest on their investment. To seek to protect Bondholders in such circumstances, the Directors have put in place protection for Bondholders such that in the case of any shortfall or default in repaying Bondholders at the time redemption is due, a Capital Protection Scheme is in place to seek to ensure that all Bondholders are repaid (in the absence of any fraud of the Company’s Directors, and subject to the Directors complying with certain strategic limits on investment which serve to further diversify and de-risk the Company’s investment portfolio) any shortfall in the amount they recover from the Company (in the event of its liquidation or insolvent administration) up to the full amount of the capital invested. " IMPORTANT: Any person reading this document and any reference to ‘risks’ within it, would have every right to believe that any of the risks that were referenced or explained in the document, were covered by the Capital Protection and Capital Guarantee that was inserted everywhere into the document and, importantly, on these risk specific pages and only AFTER all of the risks had been explained and therefore was being expressed as the mechanism that existed to offset those risks entirely. Q - Can the FCA provide information to explain why it confirmed at the FCA APM this week to the public, media and victims [and MP’s and Committee’s that it knew to have a keen interest] that it believed all Blackmore Bond promotional material was compliant with FSMA, applicable other laws and FCA Codes, including COBS and PRIN, and that the material carried appropriate risk warnings, when this document quite clearly does nothing of the sort, but does quite clearly represent to investors that there was no risk, because any risk that might have existed was entirely mitigated or offset by the Capital Porteciton/Capital Guarantee? FOIA ELEMENT 2 - False or Misleading representations? - In addition to the multiple and overriding references to guaranteed returns and with the whole investment guaranteed, there are numerous concerning representations that appear to be misleading, at best, if not entirely false. PAGE 18 - "The Blackmore Group has experience in managing investments and managing clients, having raised tens of millions of pounds over the past years in both the institutional and retail sectors." Q: Have Blackmore Group raised any money from Institutional sector? PAGE 20 - The Investment Brochure claims that 16 projects had been completed by Blackmore Bond between 2016 and 2018, generating total completed sales of £28,146,000 and a profit of 20%.
Q: Are any of the claims made by this Blackmore Bond Investment Brochure as to completed Blackmore Bond [Not Blackmore Group or other vehicle] projects and their values and returns correct? Q: Are any of the claims made by this Blackmore Bond Investment Brochure as to the 10 projects currently under construction by Blackmore Bond [Not Blackmore Group or other vehicle] projects and their values and returns correct? PAGES 22 & 23 - "The Investment Process” This consists of two pages describing the ‘Investment Process’ that Blackmore Bond undertakes in respect to every ‘investment’. A process that will no doubt impress any potential investor and only serve to encourage them. Q: I and others have evidence that demonstrates a rather different process to the one described here. What steps did the FCA take to validate that this process was an accurate representation? Q: There are multiple additional claims and statements made within this Investment Brochure that are, or certainly appear to be false or misleading, but that would be equally simple for the FCA to ‘validate’ as to their accuracy. Can the FCA provide the information that it obtained so as to make its claim this week that all of the above and everything within this Investment Brochure was factually correct, clear, fair and not misleading or false? FOIA LEMENT 3 - FSMA specific confirmations: "This Information Memorandum, which is a Financial Promotion for the purposes of Section 21 of the Financial Services and Market Act 2000 (“FSMA”), is issued by the Company which accepts responsibility for the information contained herein. This Information Memorandum has been approved as a financial promotion by NCM Fund Services Ltd, 7 Melville Crescent, Edinburgh, EH3 7JA (FCA number 183732)." "THE BLACKMORE GROUP DOES NOT OFFER FINANCIAL ADVICE. This investment is only directed at the following categories of person: sophisticated investors, high net worth individuals and restricted investors. Even if you fall within one of these categories, prospective investors must ensure that they fully understand the nature of the product and the risks, that the product is suitable for their personal circumstances and that they have the level of sophistication required to decide whether or not to subscribe for the Bonds. All potential investors will be asked to certify their level of understanding and suitability during the application process. If there is any doubt, please seek advice from an FCA authorised and regulated financial adviser. Restricted Investors will be asked to confirm upon application that they meet the guidelines laid out by the FCA in COBS 4.7.10. "
There are references to FSMA and FCA COBS applying to this investment, rather confirming that even Blackmore Bond knew it was therefore subject to that law and those rules, and rather confirms that the FCA absolutely knew this and that it was therefore very much within their Perimeter, Authority and Powers, contrary to their many false representations to that effect since the collapse of Blackmore Bond. The Investment Brochure includes references to the effect that there were ‘restrictions’ to certain type of investor. However, they do not include what the criteria was, and where it referred to FCA COBS 4.7.10 there was no link to the information or inclusion of it. Indeed, the following statement in the document is concerning in the sense that it reserves information that could have been included in writing in the Investmenr Brochure, to the less visible, and often invisible parts of the process, such as those that I and my professional colleagues witnesses in March 2017 and that I reported.
"Investment is restricted to certain categories of suitable investors and is not suitable for all. Suitability is explained in the application process."
It is clear from my reports and those of others including FCA authorised IFA’s that Blackmore Bond was being marketed and sold to non-sophisticated consumers, they were beign ‘coached’ so as to ’self-certify’ and/or having their sophistication ‘manipulated’. Q: Can the FCA please provide information so as to explain how they have come to deem this Investment Brochure as being compliant, and why the FCA has sought to claim since April 2020 that everything pursuant to Blackmore Bond was beyond their perimeter, authority and powers when the Blackmore Bond Investment Brochure itself confirms that they were very much within the FCA perimeter, authority and powers, just as I and other professionals have been saying for five or more years? Q: I must also ask the FCA for information as to why it has made those false representations to the media (Telegraph and FT Adviser to name but two), to me, to the TSC, to Parliament via statements it gave to John Glen who then read them in the House of Commons to all MP’s, and via a briefing document produced by HM Treasury and circulated to MP’s after the Panorama programme was broadcast, with intent to mislead MP’s and their constituents that were victims? FOIA ELEMENT 4 - FCA halo - In addition to the countless misleading or indeed false representations, and multiple assurances as to all investor monye being guaranteed, the Blackmore Bond investment brochure seeks to establish the same FCA Halo or illusion of FCA protection that Dame Gloster referred to in her findings in respect to LC&F. PAGE 4 "This Information Memorandum, which is a Financial Promotion for the purposes of Section 21 of the Financial Services and Market Act 2000 (“FSMA”), is issued by the Company which accepts responsibility for the information contained herein. This Information Memorandum has been approved as a financial promotion by NCM Fund Services Ltd, 7 Melville Crescent, Edinburgh, EH3 7JA (FCA number 183732). "
PAGE 15 "The policy has been arranged by All Seasons Underwriting Insurance Brokers Limited, a Lloyd’s of London broker regulated by the FCA (number 308425). The policy is granted by Northernlight Surety Company, SRL. (company registration number 3-102-692414) (NLS). NLS is a specialist in bid bonds, performance bonds, advance payment bonds, maintenance bonds, advance payment bonds, commercial performance bonds, real estate and endorsement bonds. NLS has a balance sheet showing assets in excess of $115 million." PAGE 26 "Kenneth ‘Buzz’ West, Independent Non-Executive Chairman Buzz has considerable non-executive experience in the financial services arena. He is currently the Chairman of European Wealth Group Limited and was founder and Chairman of Ashcourt Rowan plc prior to its sale to Towry. He was Deputy Chairman of Hume Capital Securities plc and Chairman of Hume Capital (Guernsey) Limited. Aside from wealth management Buzz was Chairman of the leading loss adjustor, GAB Robins, taking them from management buy out to trade sale to the US group Crawford, and the senior non-executive director to the Norwegian telecoms company Norcon plc. As an officer currently regulated by the FCA and the Irish Central Bank he is familiar with the risk & compliance needs of a fast-growing company in the fund management sector. PAGE 30 - Under the heading ‘Security Trustee’ and ‘Security & Capital Protection Scheme’ "The Capital Protection Scheme is arranged by All Seasons Underwriting Insurance Brokers Limited (ASUIA), a Lloyd’s of London broker regulated by the Insurance Companies Control Service, (number: F.O.S. 23 – 8204) and also to a limited extent in relation to its UK operations by the UK Financial Conduct Authority (FCA). The policy itself is underwritten by NLS. NLS has a Group balance sheet with assets in excess of $115,000,000 (as at December 2016). NLS has been an approved insurer for a number of prestigious clients including, the US Corp of Engineers, South African Shipyards and the US government agency USAID."
PAGE 31 "Compliance partners: NCM Fund Services Ltd, Company number SC166074 and FCA number 183732. NCM acts for over 100 funds with gross assets of over £2 billion investing in different asset classes such as property, private equity, venture capital, family limited partnerships, commodities, etc. NCM has approved this Information Memorandum as a Financial Promotion under Section 21 of the FSMA."
PAGE 32 "Goji Financial Services Limited, a private limited company registered in England & Wales under company number 10234133 & whose registered office is at 3 Waterhouse Square, 138 Holborn, London, EC1N 2SW which is authorised & regulated under the FCA with the FCA reference number 765333 to carry on the activity specified in article 25 of RAO of arranging deals as an appointed representative of Sapia"
Goji are mentioned as being involved on six different occasions in the Investment Brochure.
Q: Can the FCA provide information to explain why it did not find that the repeated inclusions and references as to the involvement of FCA regulated parties did not mislead investors, or represent the same use of references to FCA authorised parties that Dame Gloster confirmed created a ‘Halo’ of respectability and trust on the basis that there as FCA oversight? Please note, I will be making a further FOI request specific to the false representations made by the FCA since April 2020, and that were rather exposed as false by other of Mr Steward’s representations at the APM. Regards Paul Carlier