The Financial Conduct Authority (FCA) is to temporarily ban the marketing of speculative mini-bonds for 12 months, starting from January 1st 2020.
The financial watchdog is to ban the promotion of speculative mini-bonds to small investors who do not have the experience to evaluate the risks involved in complex mini-bond arrangements. The ban will mean that unlisted, speculative mini-bonds can only be promoted to investors that firms know are sophisticated or high net worth.
The ban comes ahead of the so-called “ISA Season”, when financial firms start encouraging investors to put money into their individual savings accounts (ISAs) before the end of the tax year. Many mini-bonds have ISA status.
The FCA faced mass criticism over its handling of the collapse of mini-bond issuer London Capital & Finance earlier this year. The FCA directed LC&F to remove its promotional material due to the way in which it was marketing its bonds was “misleading, not fair and unclear”.
It later emerged that the FCA’s enforcement team had been warned three years earlier about the issues but had failed to act.
LC&F was authorised by the FCA, but while the marketing of mini-bonds is covered by the watchdog, the sale of the products is unregulated.
The promotion of bonds issued by the TV property guru Kevin McCloud’s eco-housing ventures would likely be banned under the new rules. Small investors who put millions of pounds into schemes established by the Grand Designs presenter were told they could lose up to 97% of their money, it emerged in August.
The ban applies to mini-bonds sold to raise funds to buy properties, lend to a third party, or invest in other companies. It will not apply to mini-bonds that are listed, used to raise money for their own activities or to fund a single property investment.
The ban will initially last for 12 months, while the FCA consults its membership on permanent rules.
How can Smooth Commercial Law help?
At Smooth Commercial Law, our team of experts have extensive experience in dealing with a whole manner of claims that arise from negligent and/or unsuitable financial advice. We are seeing more and more mis-sold financial claims, and have managed to secure compensation for many of our clients.
Should you have a claim, we can deal with your case and look to recover compensation for not just your loss of investment but also any adverse tax liabilities that you may now be facing as well.