The BBC’s Money Box programme continued its investigation into London Capital & Finance on Saturday.
Following questions recently asked in Parliament, the actions and inactions of the Financial Conduct Authority continue to be scrutinised. The BBC interviews IFA Neil Liversidge, who was one of the first to warn the FCA about LCF in 2015. The FCA declined to send someone to appear on the programme, but did release a statement:
“Correspondence sent to us is logged and we are looking into this. LCF did not need to be authorised to issue minibonds. Nevertheless its financial promotions were caught by our rules. Our immediate priority is to investigate and to assist in the recovery of any assets. We’ll then be looking into this matter carefully and will consider what lessons can be learned.”
This is a very interesting use of the word “then”. The recovery of the assets, by which the FCA means the administration process, is almost certain to take at least a year, and could potentially take a number of years, particularly as the administrators have emphasised the complexity of this case. As an example, the administration of Secured Energy Bonds is about to enter its fifth year.
If the FCA intends to defer any investigation into its own conduct until after the administration is complete, that helpfully kicks it straight into the very very long grass, and any investigation will conclude long after any senior management in the blast zone have moved onwards and upwards.
Blackmore claims returns of 54%
The report also touched on Blackmore, and noted that while Blackmore is not related to LCF, it also used Surge as an agent and has to make a similarly high rate of return to LCF to meet its commitments to investors.
Blackmore is bullish about succeeding on that front, saying in a statement:
“Our business model is entirely on track and current return on capital employed averages 54 per cent. This has been verified by reputable independent surveying professionals. The first bond maturities are due at the end of 2020 and will be paid in full. All investors will confirm that every interest coupon has been paid on time and without issue. We’ve always operated within all required regulation. In line with advice from our solicitors and FSMA section 21 sign off partner, we continue to update and improve our website and other promotions in an ever-changing regulatory environment.”
The proof, as ever, will be in the pudding. The reference to surveying professionals means that Blackmore’s figures showing a ROCE of 54% come from “mark-to-market” valuations from a valuer rather than actual sales of their developments.
There is no reason to doubt the integrity and independence of Blackmore’s valuers, but no matter how good the valuer, the price it actually ends up being sold for can vary significantly – especially as the property market will inevitably fluctuate between now and 2020.