FCA announces 12 month ban on horses leaving through open stable door

The FCA dramatically announced yesterday that it would ban minibonds from being marketed for a period of 12 months, starting on 1 January.

In addition, all marketing material approved by an authorised firm will have to declare any commissions paid to third parties (something we’ve already seen from Blackmore and The Capital Bridge in recent months).

During the temporary 12 month ban, the FCA will consult on more permanent measures.

What exactly this is supposed to achieve is difficult to see, until you remember that a decision on who will replace Mark Carney as the UK’s top economic panjandrum is expected any day now. Former bookies’ favourite Andrew Bailey is badly in need of something that makes it look like he has a grip. This is something.

Many unregulated investments are already promoted under the pretense that its investors are all high-net-worth or sophisticated investors. The FCA’s supposed “ban” is not a ban as a ban is something that stops you doing what you want to do. Not an extra hoop to jump through that many are jumping through already.

To quote Simon Marshall who commented on IFA trade rag New Model Adviser:

I was contacted the other day by one of these outfits. The guy said to proceed I needed to select whether I was High Net Worth, Sophisticated or Retail. He then pointed out that pretty much everyone was in the sophisticated category, which shows that they are already looking at a workaround.

Other workarounds commonly employed by the dodgier end of the minibond market include getting investors to click-through a declaration that they are high net worth or sophisticated (which many will do so without reading in the same way they dismiss cookie notices) or electronically sign a document before receiving investment literature.

Investors are often told that this is “just some red tape”. And in the absence of the FCA running spot checks on unregulated investments and their introducers to check that they hold evidence that their investors actually are high-net-worth or sophisticated (not just declaring they are), as they are required to, it remains exactly that.

The FCA’s press release contains a list of actions it has taken to stop UK retail investors losing money in unsuitable unregulated investments:

Investigating more than 80 cases of regulated activities potentially being carried out without having the right FCA authorisation.

Assessing over 200 cases of financial promotions that appeared not to have complied with the FCA rules.

Seeking to persuade the internet service providers, particularly Google, to take more action, for instance to take down websites promptly where they are likely to involve a breach of law or regulations.

Contact with the Department of Culture, Media and Sport to urge inclusion of financial harm in the proposed legislation on online harms.

Developing tools for data analysis, for instance introducing web scraping to assist in the identification of mini-bond promotions.

If this list was meant to disabuse us of the impression that the FCA prefers visiting fellow bureaucrats in the Ministry of Fun or big companies like Google for tea and biscuits, instead of getting its hands dirty with those breaking the rules, it’s not succeeding.

Conspicuously absent from the list is any sign of action taken against the numerous unregulated schemes still currently standing to check that they have complied with their regulatory obligations to obtain evidence that all their investors are actually high net worth or sophisticated.

We should also bear in mind that the ban only affects companies using the mini-bond structure, and has no affect on other unregulated investment structures like “invest in a hotel room with 8%pa assured rent”.

Bailey stated that the timing of the announcement was with a view to “ISA season” (when ISA managers of all varieties encourage investors to use their ISA allowance before the tax year rolls over in April).

The other interesting thing about the timing of the FCA’s announcement is that if any unregulated schemes collapse as a result of new investment drying up, it will be after a decision is made on the Bank of England appointment.

6 thoughts on “FCA announces 12 month ban on horses leaving through open stable door

  1. Nice one.

    Although, this is troubling: “…to proceed I needed to select whether I was High Net Worth, Sophisticated or Retail….” there are clear, unambiguous criteria – that every IFA would know by heart – and it isn’t a case of asking “pick one of three…” The adviser, if a real IFA, as defined by the rules, would know instantly – because he/she would “know their client” …so anyone asking you to “pick one” is not really an “adviser” … but a scammer!

    What’s frightening is although we have the legislation in place and have had, for over a decade – almost two – it doesn’t seem to be worth the paper it’s written on! It just isn’t deterring anyone …. and thousands of people get ripped off annually and no one seems to care!

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  2. @ Stephen: That’s all true, but remember that meeting these criteria would make something an exempt promotion, so there’s no need for any regulated party to be involved in getting these investments into the hands of people with cash to burn.

    The real issue is that substantially all promoters take investors’ declarations at face value without even doing occasional checks. The two certified categories are easy to vet (“send us a copy of your certificate”) but the rot really set in when the self-cert category was invented. Even then, promoters could be more robust (e.g., by requiring investors to specify precisely which of the categorisation criteria they meet) but there’s no legal obligation to do that, so it’s not economically rational to do any such checks.

    there’s also a philosophical question around what “an appropriate degree of protection for consumers” looks like. If people determinedly click through a check-wall and make a false representation by doing so, how much of that is the fault of the promoter?

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  3. “… so it’s not economically rational to do any such checks. … If people determinedly click through a check-wall and make a false representation by doing so, how much of that is the fault of the promoter?”

    That’s an interesting point of view.

    Given it’s unlawful to promote such investments to “retail” – unsophisticated, Low Net Worth clients – and the law doesn’t give any “get out of jail free card” by saying except when the client makes “false representations”, then surely it’s “rational” to carry out such checks in order to prevent being prosecuted, were the FCA to get off their backsides and do their job?

    Consider a different scenario, how about the argument: “I didn’t know she was under age – she said she was 18!” That argument doesn’t work and I doubt anyone would sympathise with an offender making such an excuse, so why should a similar excuse be ok in this scenario?

    Surely, it’s still the fault of the promoter? Such “checks” might make the promoter’s job harder – so his job is hard, get over it. Properly regulated IFA’s do the checks. Scammers don’t do the checks because they would have to turn everyone away and that means no commission! Scammers rely on the “unsophisticated” to fall for the promotion – hence thousands of people are ripped off year after year after year and the impotent FCA spends years contemplating its navel while the poor old victim sits at the bottom of the food chain in financial ruin!

    The FCA will be first against the wall when the revolution comes, closely followed by the blood sucking administrators and lawyers that drain funds dry in charges while everyone navel gazes!

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  4. Aha! Blackmore, the infamous gruesome twosome …. they, imho should NOT be exempt, but should be seriously locked up and the key thrown away if the authorities took their responsibilities seriously!!!

    Tweedledum & tweedledumber go back a long way in their involvement in scams … back as far as around 2012-ish with their involvement in the Capita Oak, Henley pension scams, feeding introductions to the tune of 200 a month and earning close to £1m in commissions! They however, still enjoy freedom AND the money they have earned off the backs of vulnerable victims THEY preyed on!!! They are the SCUM of the earth and the FCA know it!!!

    Following that scam, they clearly decided a fund of their own was better, and started Blackmore Global, an Isle of Man unregulated fund of their own, PLUS Aspinal Chase, a cold callid outfit based in Manchester, AND in association with Square Mile International Financial (previously called AKTIVA Wealth Management), orchestrated a scam described here in their own words, https://drive.google.com/open?id=1goL6809q3ESG5jZF8WJj2tyTAoy3Rt8A , to transfer UK pensions into QROPS, in the Isle of Man (Kreston), Malta (Integrated Pensions Malta Ltd.- now called Azure Pensions Ltd, https://www.azurepensions.com/team/andy-dawson/ – this was the person I went head to head with to fix my own issue with the pension scam I got caught up in, all orchestrated by John Ferguson & David Vilka ( https://pension-life.com/not-so-square-mile-and-far-from-lilly-white/ and https://pension-life.com/serious-violation-of-investors-trust-by-investors-trust-life-office/ ) – which Dawson did outstandlingly well I will admit – plus they also used GFS in Hong Kong – PHEW!

    That might seem complex but it was designed to be! Obfuscate the information and they escape justice!

    But I have ALL the evidence that pieces this scam together. The issue is, Action Fraud don’t give a S**t and don’t want to see it, telling me there are no leads! Seriously? I have more leads than crufts!

    Property Bionds – or commonly known as mini bonds – is just the NEW BLACK for these scammers.

    Following the 2015 pension freedoms legislation, requiring further due diligence by trustees of defined benefit pensions, scammers sought a new route to your wealth – mini bonds!!!

    The useless FCA are just way too slow to catch up and by the time they do, billions will have been taken by these bar stewards!!!

    Once the stupid, ridiculous, waste of time FCA catch up and leglislate, the scammers will have moved on to a new scheme, and so on it goes, with the scammers always one, if not millions of step(s), ahead of the authorities!!

    It’s a real real joke!!! AND it frustrates me a LOT!!! I want the “family jewels” of these people removed and fed to dogs!!! They really are the SCUM of the earth!

    (Any politician that would stand against these people would surely get my vote!!! – sadly NONE choose to – probably because they get BOUGHT off, like Johnny Mercer, paid £85k per annum, for just 20hrs work per month, by the promoter of LC&F Surge Financial!!! You work it out!!!

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