Bound as it often tends to be by legal concerns, the financial regulator would not comment on the saga of Stephen Donnelly and Friends First yesterday.

A spokeswoman referred to the statement it issued on December 20th, 2006.

It stated that it had entered into a settlement agreement with broker firm MIS Financial Services and its director, Stephen Donnelly, following "suspected breaches" of its regulatory requirements. The breaches related to "a failure to act honestly and fairly in conducting business activities in the best interests of clients".

What this actually meant was that Mr Donnelly had fraudulently promised a Friends First client something he couldn't deliver: a 40 per cent guaranteed return on an investment bond.

The statement made no mention of Friends First, Mr Donnelly's former employer. At the time of the fraud, Mr Donnelly had moved on and was selling the company's products as an independent broker.

MIS Financial Services, the broker firm, did not escape. It had its authorisation as a multi-agency intermediary revoked and said it would not renew its licence as a mortgage intermediary.

Mr Donnelly was barred from "the management of a regulated financial services provider" for five years.

It might sound like a subtle distinction, but property investment company Arley Limited, of which Mr Donnelly is still a director, is not a regulated financial services provider. It is a single purpose company established by Friends First, Mr Donnelly's former employer, to develop and sell real estate. The financial regulator cannot touch it.

All parties co-operated with its investigation, the regulator said in December, "and the matter is now closed".

That is now looking like wishful thinking.