After
nearly 18 months the FOS has ruled that it is able to look at a test case of an
investor who has complained about the role of Independent Portfolio Managers
(IPM) in promoting the original bonds.
IPM were
appointed the Security Trustee to look out for the interests of investors. A
number of investors have claimed that they failed in this duty.
The FOS preliminary decision is that IPM engaged in
the Financial Conduct Authority (FCA) ‘regulated activity’ of making
arrangements for investments due to their status, from the outset, as Corporate
Director of Secured Energy Bonds and Security Trustee for the
bondholders. If this decision is confirmed it may assist investors in
other failed mini-bonds which benefit from a security trustee [NB this is a lay
opinion and has not yet been discussed with lawyers)
The
latest ruling, follows some flip flopping by the FOS, which at first indicated
it could look at the investors case against IPM, then produced an opposite
view. Investors then felt compelled to obtain a barrister’s opinion to assist
their complaints after the negative adjudication from FOS.
Now, they
have ruled that the claims can be examined. IPM have until 27 February 2017 to
respond.
The
ruling will come as a relief to the 973 investors in Secured Energy Bonds, who
looked set to lose all their money (£7.37 million), when the company went into
administration at the beginning of 2015.
The
problems arose, when a large amount of the funds intended to provide solar
panels on 22 school buildings was instead siphoned off by the Australian parent
company CBD Energy for other purposes. CBD Energy went into administration in
November 2014.
The first
investors knew of the problems came at the end of January 2015 when an interest
payment on the three year bonds (paying 6.5% interest) was not made.
The
investors formed a campaign group, the SEB Investors Action Group, which has
been raising the case with the FCA, the FOS, the Treasury, Treasury Select
Committee and well over a hundred MPs.
The
regulators have at times been less than helpful. The FCA first directing
investors, often via their MPs to the FOS, only for that body, after initially
appearing willing to take up the case, to then change tack.
Two
further products, Providence Bonds and Providence Bonds 2, (Total £8m) also
went into administration last September. Many of the same investors, who had
been hit with the SEB default, were caught again. The Providence Bond investors
have now also established a campaign group.
Altogether
there are over 1,600 investors across SEB and Providence Bonds, who have lost
more than £15 million as a result of these defaults.
The FCA
did eventually, in September 2016, move to restrict IPM’s FCA
registration.
There are
clearly significant anomalies in the way that the FCA allows financial
promotions to be approved without facilitating a simple remedy, through the
FOS, for ordinary members of the public (retail investors).
Why does
the FCA set criteria for financial promotions that are not easily subject to
challenge or redress through the FOS?
The
latest decision is to be welcomed, as it has positive implications for SEB and
possibly other mini-bond investors. Whilst there is still some considerable way
to go before investors receive any of their money back, the regulators do at
last seem to be starting to regulate and stand up for investors, who through no
fault of their own have lost thousands of pounds.
* Investors who have not previously been in touch with
either of the Investors Action Group are invited to contact:
secured.energy.bonds.iag@gmail.com or providencebonds.iag@gmail.com
Do you think if IPM is eventually ordered by the FOS to return investor monies they will do so?
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