Friday, 26 February 2016

Secured Investment Bond investors being sold out by Financial Conduct Authority

It is very difficult not to think that wronged Secured Energy Bond (SEB) investors are being led a merry dance by the so called regulatory authorities in the UK.

Having seen over £5 million of what they invested to put solar panels on 22 schools whisked away by the Australian parent company CBD Energy (in total contravention of the stated purpose of the mini-bond), investors thought that their representative on the board of the SEB company might have done something to safeguard their interests. This afterall was what Independent Portfolio Managers (IPM) were there to do as board member and security trustee relating to SEB.

Investors believe IPM singularly failed in that aspect, to either check into the validity of the so called "secured" product that they were underwriting or safeguard investors money when it looked as though it was all heading to Australia.

Investors were directed by the FCA and treasury minister Harriet Baldwin to the Financial Ombudsman to seek restitution - if IPM turned down their initial claims.

Investors followed the path recommended, only to find it to be a total wild goose chase. First, the FOS adjudicator seemed sympathetic indicating that they could look at the case. IPM then challenged this opinion. A new adjudicator came in and took over the case, overturning the first opinion and issuing a drastically different adjudication saying that investors could not complain - the line being that IPM had not conducted a regulated activity that they could look at and there was no customer relationship  between the company and SEB investors.

Investors were invited to make representations, prior to the case going onto an Ombudsman for final adjudication to decide whether or not investors could complain. However, before this could happen, the FCA issued a statement saying: “Investors can approach the Financial Ombudsman Service (FOS), in relation to the approval of financial promotions by Independent Portfolio Managers Ltd (IPM). However, investors should note that it is unlikely their complaint will succeed if it is based wholly on IPM’s role as approver of a financial promotion – the firm would need to have carried on another activity in addition to approving the financial promotion (for example, advising the investor, or arranging the transaction for them).”

The implications of this declaration are serious for a far wider group of investors, than just those caught up in the SEB debacle. The policy will mean that  any FCA authorised company could approve any advertisement without worrying what was in it - there would be no come back, certainly not via the FOS.
SEB investors sense a stitch up, as though it has all been decided that they will not receive any recompense for the injustice perpetuated against them, even before the case has been considered by an ombudsman .

So where to now for the investors? They have been directed by the FCA to the FOS to seek a remedy in their case, yet this has so far proved a fruitless trail. At present investors believe they are simply being led down blind allies with a view to their eventually giving up the fight. This is not likely to happen, given the injustice at the heart of the whole SEB debacle.

The process thus far also raises wider questions about the integrity of the regulatory framework in this country and whether it is in anyway fit for purpose. There are questions that should concern everyone:

* What is the point of the FCA having rules on advertisements being "fair, clear and not misleading," if they can be contravened by an FCA authorised firm which approves a promotion but leaves investors unable to effectively bring a complaint to the FOS.

* Are the UK authorities going to turn a blind eye and let a foreign company, which has issued so called secured mini-bonds to get away with the mass extraction of investors funds to bail out its failing  company back home, in total contravention of the stated purpose of the bond. 

If the aforesaid is true it provides a model for any fraudster to prey on investors. So will the regulators and get on with what they are paid to do which is regulate? 

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