5 year struggle of Secured Energy Bond investor to get his money back

The offer looked good. The opportunity to invest in a project to put solar panels on 22 schools across the country. The return a decent rate of 6.5 per cent over three years.

That was 2013. I first saw the adverts in the Guardian newspaper. I was not a big investor, though looking to put some money into what I saw as environmentally sustainable projects.

SEB appealed to me as a small time investor on a number of levels. As a committed environmentalist I wanted to put some money into something that combatted climate change.

I was also one of the many investors hit by the rapid fall in interest rates and was looking for something that would provide a bit more of a return.

There were risks, this was afterall a mini-bond, which meant the project initiators had not been able to raise the funds from more traditional sources, such as the banks.

However, as an investor, my concerns were satisfied by the presence of Financial Conduct Authority (FCA) regulated Independent Portfolio Managers (IPM). They took on the role of security trustee and corporate director on the bonds. IPM also played a role as approver of the invitation document.

Despite any reservations there might have been, this seemed pretty safe, just so long as all involved did what it said on the tin (or in this case Invitation Document).

The solar panels would be fitted to the schools, so that even if some problems came along there would be those basic assets in place to claim against.

All went along smoothly for the first year, the quarterly interest payments being made.  Trouble began in January 2015, when the fourth interest payment was not made.

I had that queezy feeling the stomach that something was wrong. This grew, as emails to the company remained unanswered and the phone line was dead. A call to Capita, which dealt with interest payments confirmed that they had been suspended. There was a dawning feeling that I had been had, as well as a certain powerlessness.

The problems arose, when a large amount of the funds intended to provide solar panels, was siphoned off by the Australian parent company CBD Energy for other purposes. CBD Energy had been placed into administration in 2014.

SEB was then put into administration, with Grant Thornton appointed administrators.

The first opportunity to meet any of the other 900 odd investors who had similarly put their money in good faith into SEB came at the creditors meeting in April 2015. There was a lot of anger and a decided lack of optimism.

A few of us met afterwards, agreeing to stay in touch – establish an email contact list, so that investors could be kept informed about what was going on. Key members were Frances Goodchild and Fiona Pitkeathly. It was this group that rapidly morphed into the SEB Investors Action Group.

There was media coverage and contact made with MPs. Investors were directed to contact IPM in the first instance, then if their response was not satisfactory to go to the Financial Ombudsman Service (FOS). A number of investors took this route, including myself.

In September, it was doubly irritating to learn that IPM boasting about their role as security trustee. They then took a similar role on bonds like Providence I and II, which also subsequently went into administration.

The initial response of the FOS was favourable, indicating that they were minded to look at the investors case against IPM.

However, this then changed, with the opposite viewpoint adopted. The SEB Investors Action Group contacted more MPs, made representations to the Treasury Select Committee and the FCA.

It was at this point that some investors took on FS Legal to challenge the FOS finding. A barristers opinion was obtained, which helped to get FOS to change its position.

So last year, FOS decided there was a customer relationship between investors and IPM, so they could look at our complaints.

They agreed to look at two test cases. The result was that FOS has now ruled in those cases for the investors and against IPM

The FOS ruled that IPM’s involvement was not only approving the promotion documents but that it ‘had an ongoing role in the investment scheme’ and was ‘central to the security and quality assurance arrangements’ of SEB.

It also ruled that the security that was put in place for the mini-bond was flawed, “leaving the security secured, in effect, on nothing. This was a fundamental flaw and one which IPM should reasonably have spotted.”

At time of writing, the two test case investors have accepted the ruling, so IPM have now been ordered to pay. IPM is no longer an FCA regulated company.

If they fail to pay and cease operating, then investors have to go to the Financial Services Compensation Scheme. More delays but eventually I should see my money back.

It has certainly been a long road to come to this point. I cannot deny that for much of the five years I did not think I would see my money back. Sometimes it seemed things were being drawn out in the hope that investors would just give up and go away. Now, there is an immense feeling of relief, that I will be seeing my money come back.

There are many lessons though to be drawn from the case, not least the effect of collective action. Had that small group of investors not come together after the creditors meeting back in April 2015, I do not believe we would be seeing our money back at all.

There has also been recognition of the need for stronger regulation of this area, largely due to this case.

published - 28/7/2018 - Guardian newspaper -  https://www.theguardian.com/money/2018/jul/28/i-lost-my-cash-in-a-solar-project-but-after-a-five-year-battle-ill-get-it-back