Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether he plans to commission an independent inquiry into the regulators' handling of the collapse Blackmore Bond plc.

The Financial Conduct Authority (FCA) is responsible for ensuring consumer protection for a broad range of financial services products. However, it does not regulate all financial services firms and products. Blackmore Bond Plc was not authorised by the FCA and the sale of the ‘mini-bond’ product it offered was not an activity regulated by the FCA. The FCA does not have power to investigate a firm that is unauthorised and not carrying out any regulated activities. The Government therefore has no plans to commission an independent inquiry into the FCA’s handling of the collapse of Blackmore Bond plc.

The Financial Services Compensation Scheme (FSCS) is the compensation scheme of last resort for financial services. The FSCS is an independent non-governmental body that carries out its compensation function within rules set by the FCA and the Prudential Regulation Authority (PRA), who are also independent of Government. The FSCS can only pay compensation in respect of certain regulated activities and the Government is unable to intervene or comment on specific cases and decisions taken by the FSCS.

It is an important point of principle that the Government does not step in to pay compensation in respect of failed financial services firms that fall outside of the FSCS. Doing so would create the wrong set of incentives for individuals and an unnecessary burden on the taxpayer.

In April 2021, the Treasury launched a consultation on proposals for bringing mini-bonds (also known as Non-Transferable Debt Securities) within the scope of regulation. On 1 March 2022 the Treasury published a response setting out its preferred approach and intentions for taking this proposal forward.