Despite defending the outcome of its handling of complaints against a mini-bond firm, the U.K.’s Financial Conduct Authority (FCA) is offering compensation to investors for the length of time these inquiries took.
In a letter to investors, the FCA reported on its own investigation into complaints against Blackmore Bond plc, an unregulated firm that raised capital via so-called mini-bonds — which are typically high risk and high return vehicles, similar to promissory notes.
According to the FCA, between 2016 and 2018, the firm issued a series of six mini-bonds, raising £47 million, ostensibly to fund property development. The investments were only available to sophisticated or high-net worth investors, similar to exemptions that are commonly used in the Canadian market.
After the firm stopped making interest payments on the mini-bonds, and was eventually placed into administration in April 2020, the FCA received a series of complaints about the firm and the regulator’s alleged failure to protect investors from investing in the offerings.
In their complaints, investors have “raised a number of different issues about the FCA’s action surrounding Blackmore,” the FCA said, “including that the FCA failed to act following warnings about the firm, failed to protect investors and allowed misleading marketing.”
Among other things, these complaints called on the FCA to start a criminal investigation into Blackmore and to compensate them for their losses.
However, on Thursday, the FCA said it will not uphold these complaints.
“The FCA never had any supervisory oversight of Blackmore, handled intelligence received about the firm appropriately and found previously that the financial promotions were largely accurate and contained relevant risk warnings,” the regulator said in a release.
Additionally, the FCA said it investigated the role of two regulated firms that approved promotions for the mini-bonds and found that there were no grounds for enforcement action against them.
Despite these conclusions, the regulator said it will pay investors compensation for the length of time that it took to investigate their complaints, which were paused between June 2021 and December 2023, while the enforcement investigations into the two regulated firms played out.
Specifically, the FCA said it will voluntarily offer investors between £150 and £250 in light of the delay. Investors will have until Feb. 21 to decide whether to take these offers.