This article represents the views of its author and not necessarily those of ShareSoc.
Following on from the BBC Panorama programme on the Blackmore Bond scandal the Transparency Task Force have launched an attack on the competence of the Financial Conduct Authority – see https://www.transparencytaskforce.org/letters-to-mps-about-blackmore-bond/. It includes a letter you can send to your Member of Parliament asking for some reform.
I agree with most of their recommendations on how matters can be improved.
One issue I would also raise is that the Panorama programme made it clear that risky and unregulated investments were sold to individuals who would not normally have qualified as “sophisticated investors” or as high net worth individuals, as is required.
It is possible to ‘self-certify’ yourself as a HNWI or a sophisticated investor. To self-certify as a HNWI you have to earn at least £100,000 per year or have net assets (excluding your property, pension rights and so on) of at least £250,000.
To self-certify as a sophisticated investor you must: have been a member of a business angels network for at least six months; or have made at least one investment in an unlisted security in the previous two years; or have worked in a professional capacity in the provision of finance to small or medium-sized businesses in the last two years or in the provision of private equity; or be or have been within the last two years a director of a company with a turnover of at least £1m.
These are quite low hurdles and as the investor is only making the declaration with no checks necessary or evidence provided it is wide open to abuse. The company accepting the certification only has to have a reasonable belief that it is correct.
The high net worth requirements should be raised substantially. However there should be an alternative method of certification which would require passing an online test or self certifying that you have significant experience in the industry or relevant qualifications.
There are simply too many cases of dubious investments being sold to unsophisticated investors who have no way to judge the prudence of the matter.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )