Mini-bond marketing ban to be made permanent in the UK

UK Financial Conduct Authority announced proposals to make the ban of mass-marketing of speculative liquid securities to retail investors permanent.

Introduced in January, the ban was a response to concerns that speculative mini-bonds were being promoted to retail investors who do not understand the risks involved and could not afford potential financial losses.

The FCA proposes a few changes and clarifications to the ban in making it permanent including bringing bonds with similar features to speculative liquid securities and which are not regularly traded within the scope of the ban.

Sheldon Mills, Interim Executive Director of Strategy and Competition at the FCA said:

Sheldon Mills, FCA

Sheldon Mills

We know that investing in these types of products can lead to unexpected and significant losses for investors. We have already taken a wide range of action in order to protect consumers and by making the ban permanent we aim to prevent people investing in complex, high risk products which are often designed to be hard to understand.

Since we introduced the marketing ban we have seen evidence that firms are promoting other types of bonds which are not regularly traded to retail investors. We are very concerned about this and so we have proposed extending the scope of the ban.

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The mini-bond ban will apply to the most complex and opaque deals where the raised funds are lent to a third party, to buy or acquire investments or to buy or fund the construction of property. There are exemptions such as regularly traded listed bonds, companies which raise funds for their own commercial or industrial activities and products which fund a single UK income-generating property investment.

Products caught by the FCA ban can only be promoted to investors that firms know are sophisticated or high net worth. Authorised firms will have to include in their marketing materials a specific risk warning and disclose any costs or payments to third parties that are deducted from the money raised from investors.

FCA’s powers are limited over issuers of speculative mini-bonds who are usually unauthorised, however the UK regulator will be able to take action when an authorised firm advertises a financial promotion of these products or directly advises on or sells them.


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