Monday, 8 August 2016

Secured Energy Bond investors were expecting their £7.5 million investment back at the end of this year - instead they have faced two years of getting the run around from regulators, with little sign so far of getting their money back

Secured Energy Bond investors must be wondering whether there will be any resolution of their problems in time for what was due to be the maturity of the bonds at the end of the year.

Lest we forget, SEB were launched in 2013, paying 6.5% over a three year period. The first three payments were made on the quarters, then the alarm bells began to ring in January 2015, when the company defaulted on the interest payment.

Since then, it has been an uphill struggle, with the investor’s campaign group seeking to get the money back for those who originally invested in good faith.

The £7.5 million pledged by investors was to finance the fitting of solar panels on 22 schools across the country. All would have been fine, had the parent company CBD Energy not siphoned off the funds provided for other purposes in Australia, in total contravention to the stated purpose of the bond.

Ever since SEB was put into administration, investors have been struggling to get justice.

Appointed administrators, Grant Thornton have tracked down six schools that had the panels fitted. They continue with efforts to recover proceeds but it is a slow process.

Meanwhile, investors seem to have been passed around the regulatory framework, from the Financial Conduct Authority to the Financial Ombudsman and back.

A number of MPs have become involved, raising investors concerns with the authorities.

Last autumn, it looked as though the FOS could look favourably on investor’s case against the Independent Portfolio Managers (who approved the financial promotion of the mini-bond and acted as Corporate Director and Security Trustee) but then then the process slowed. 

The appointment of a new FOS adjudicator saw an about turn on the first adjudicator’s decision, declaring that they did not think the FOS could look at the issue. Investors then brought in lawyers to contest the views of the FOS.

Since then there have been delays, with the latest communication from the FOS on 28 July explaining that more time was needed by the appointed ombudsman to consider the situation and determine whether SEB investors are “eligible to complain”. There will be more in September.

So what is going on, when can investors expect to see their money back? At the moment it just seems to be delay after delay – the more cynical might wonder whether the whole run around that investors have been given since the company went into administration last year has not been about exhausting their efforts in the hope that they will just go away.

This is not going to happen. At the end of this year investors should have been receiving their final interest payment and capital back. A number of investors are really struggling, as they put a large amount of their savings into what at the time looked like a bona fide investment. They expected the interest and capital back by the end of 2016.

The way this issue has been dealt with thus far by the regulators is far from satisfactory. They appear to have moved from acknowledging that a wrong has been committed to trying to find a way out of helping in any meaningful way those severely affected by what has happened.

It seems savers are to continue to be punished and made to pay for the fall out of the financial crisis of a decade ago. The SEB case raises important questions. There are likely to be more SEBs in future – in this low interest environment, savers are being pushed toward more risky investments and other mini-bonds continue to be promoted with the same so called “protections” that the SEB mini-bond came with which all seem to have amounted to nothing for investors thus far. The denial of any sort of responsibility from the regulators thus far does not engender much confidence.  

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