Financial Conduct Authority and Blackmore Bond plc

John Glen Excerpts

Wednesday 30th June 2021 Commons Chamber

[The Economic Secretary to the Treasury (John Glen)]

I congratulate the hon. Member for Glenrothes (Peter Grant) on securing this debate. I also pay tribute to the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for their contributions. I extend my sympathies to the Blackmore Bond investors. The hon. Member for Glenrothes set out the distress that has been caused to those many individuals, some of whom are his constituents. I am painfully aware of their very challenging situation through my own conversations and correspondence, and this evening we have heard more of those troubling accounts. Given these difficult circumstances, it is only right that I explain the reasoning behind the Government’s course of action and some of the decisions that we have made so far. I will also touch on the conduct of the FCA, the independent regulator.

Let me first remind the House of the background to this situation. As Members will be aware, Blackmore Bond was an unregulated firm established in 2016. Between 2016 and 2018, it issued non-transferable debt securities, otherwise known as mini-bonds, to retail investors. It raised £46 million, involving approximately 2,800 UK investors, to be used in property development projects. Blackmore stopped making coupon payments in 2019 and administrators were appointed on 22 April last year.

The orientation of most of the hon. Gentleman’s remarks was about the failures of the FCA, but I want to try to address some of his other specific points. He asked about the way that Blackmore hid behind other regulated firms such as Amyma. It is true that although several other firms were involved in the distribution of Blackmore bonds, some of which were authorised by the FCA, the Blackmore bond itself was not regulated. Amyma was not directly authorised by the FCA. It was an appointed representative of another authorised firm, Equity For Growth (Securities) Ltd, between July 2018 and September 2019, when its status was terminated. The FCA intervened to take down Amyma’s website following further investigation. Similarly, as a result of steps taken by the FCA, Northern Provident Investments, an FCA-authorised firm, withdrew its approval of Blackmore’s promotional materials, meaning that its bonds could no longer be marketed. This is clearly a very complex area, but ultimately the FCA cannot be said to have the same set of responsibilities towards unauthorised firms engaged in unregulated activities.

[Peter Grant]

The Minister gave the same dates on Amyma as me—between 2018 and 2019. Did it not strike him, as it struck me, that Amyma was an appointed representative of another company, but the concerns about it arose in 2017, before it appeared to be an appointed representative of anybody? Does he not agree that there is something to be looked at there and that the Financial Conduct Authority should be asking questions about it?

[John Glen]

I have set out the record as the FCA has presented it. I am sure that the hon. Gentleman will wish to continue correspondence with the FCA on some of those unresolved matters. However, I do make the distinction between the different responsibilities that the FCA has with regard to the different actors in this case.

It is only right that we do our utmost to minimise the chance of episodes like Blackmore Bond taking place in future, so I want to turn to the regulation of mini-bonds and the steps we are taking to safeguard consumers, which was a key focus of the hon. Gentleman’s remarks. I want to be clear to the House that the Government are committed to ensuring that the financial services sector is well regulated and consumers are adequately protected. That is why in April we launched a consultation that includes proposals to bring the issuance of mini-bonds into regulation. This follows the action taken by the FCA to ban the promotion of high-risk mini-bonds. This work is the culmination of a review into the regulation of mini-bonds that I announced in May 2019, and it delivers on one of the recommendations of Dame Elizabeth Gloster’s recent report. The consultation closes next month, in July, after which the Government hope to bring forward plans to legislate in the autumn.

The hon. Member for Glenrothes also referred to the financial promotions regime, and I think that underlying that was a concern about what the Government are doing to improve the efficacy of the regime. We continue to keep the legislative framework underpinning the regulation of financial promotions under review, including whether it is suitable for the digital age. The Government have set out our intention to bring forward legislation to create a regulatory gateway for authorised firms approving the promotion of unauthorised firms. That change is designed to strengthen the regime by ensuring that the firms able to approve financial promotions are limited to those with the relevant expertise to do so. The FCA will be able to better identify when a financial promotion has breached the restriction and take action accordingly.

[Kevin Hollinrake]

The Minister is doing a lot to close down opportunities for these scams, but there is a further way that we could take this forward, which we have discussed. Google has today said that it will ensure that all firms advertising on its platform are regulated firms. We could require that of all platforms and all firms that provide an internet channel, for example through the online harms Bill, so that all internet advertising in this area is regulated.

[John Glen]

I thank my hon. Friend for his intervention. He speaks with some authority on these matters. There is a process that will continue, as he knows, through the scrutiny of that legislative vehicle. We do need to make sure that, overall, including through the Department for Digital, Culture, Media and Sport’s online advertising review, we come out at the right place in dealing with these significant challenges for consumers.

As well as introducing new legislation to protect savers, it is right that our regulator also closely examines its own operations, to ensure that it can protect consumers as effectively as possible. As a result, the Government welcome the FCA’s ongoing transformation programme, which is introducing reforms that will fundamentally change the way it works. The programme will help the regulator become more efficient and effective by, among other things, enhancing its use of technology in order to make interventions earlier, which clearly is desirable.

It is heartening to see that significant steps have already been taken. Those include important structural changes within the organisation, as well as the appointment of the FCA’s first chief data information and intelligence officer. I particularly welcome this focus on improving the FCA’s use of data and analytics, which will improve the efficiency and speed with which the regulator can act.

These are serious matters, and we have spoken about the number of our constituents who have been adversely affected. I regularly meet the FCA’s chief executive, Nikhil Rathi, to discuss the transformation programme and monitor progress. There can be no complacency. This is a complex area where financial services are evolving all the time, as are fraudulent activities. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) mentioned the innovation announced today by Google, which is a welcome step, but we will need to look at these matters and at the experience through different cases, such as the Blackmore Bond, in order to get this right.

I close by reiterating my deep sympathies to all those who have suffered as a result of the Blackmore scheme. As a Government, we recognise that financial services are constantly evolving and the regulatory system must, therefore, be ready to respond. As I have highlighted this evening, we are committed to a process of continuous improvement in all dimensions to ensure our regulations benefit both UK consumers and the wider economy.

[Mr Deputy Speaker (Mr Nigel Evans)]

The Speaker started the day with some wonderful warm words in tribute to Ian Davis on his retirement after long and dedicated service here in Parliament. On behalf of the Chairman of Ways and Means, the First Deputy Chairman and myself, I wish Ian well on his well-deserved retirement and thank him. Because of the skill he demonstrated on a daily basis in Parliament, he made the work we do from this Chair so much easier. We wish you well, Ian. Thank you for everything you have done.

Question put and agreed to.