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: firstname.lastname@example.org or email@example.com