Emma RadmoreFCA has published a copy of its letter to the Treasury Select Committee confirming that it will not be taking action against either of the two firms that approved promotions for the collapsed Blackmore Bond plc’s mini-bonds. FCA has concluded that the promotions were “largely accurate” and contained “very relevant risk warnings”. The letter explains that Blackmore, as bond issuer, did not need to be, and was not, authorised. It promoted the bonds by information memoranda approved by 2 authorised firms. The memoranda explained Blackmore’s business, included various statements warning consumers about the risks of the investment and the business model, disclosed that costs of up to 20% of the overall subscription could be incurred as part of raising capital. It also stated that the bonds could not be transferred to another investor.
At the time the bonds were marketed, it was permissible to market them to investors who could certify they could afford potential losses, were investing no more than 10% of their net assets or had appropriate experience or investment sophistication.
Now that FCA has concluded that neither of the approving firms (one of which has since gone into liquidation, and which was also an ISA manager and custody provider for some of the Blackmore bonds) breached its financial promotion rules, it will consider the 26 complaints relating to Blackmore which it had stalled pending the outcome of its enforcement investigations.
The letter also explains other regulatory actions since the date of the promotions, the change to FCA rules in 2021 to ban the mass marketing of speculative illiquid securities and the subsequent change earlier this year which changed the consumer journey for high-risk investments. The letter ends by noting that the continued presence of exemptions for marketing to HNWIs and sophisticated investors complicates the effective supervision of financial promotions and results in consumer harm that FCA cannot mitigate.