FCA – permanent ban on the promotion of speculative illiquid securities, including mini-bonds, to retail customers

The FCA has confirmed their final rules to permanently ban the mass-marketing of speculative illiquid securities (SIS), including speculative mini-bonds, to ordinary retail investors with effect from 1 January 2021. The Policy Statement and final rules can be read here. 

A temporary ban was introduced in January 2020, following serious concerns that SISs were being promoted to ordinary retail investors who neither understood the risks involved, nor could afford the potential financial losses. Read our article regarding the temporary ban.

Following consultation, the ban is now being made permanent, extending it to cover similar listed securities where these are not traded frequently and introducing a small number of technical changes from the temporary ban.

This follows on from longstanding rules restricting marketing of non-mainstream pooled investments (NMPI) to ordinary retail clients.

Subject to some conditions, the exemptions to the restriction on promotions that previously applied in relation to NMPIs apply to the new ban too, namely clients who satisfy the definition of certified high net worth, certified sophisticated or self-certified sophisticated.

Whilst issuing these products is not a regulated activity, the FCA can take action when an authorised firm approves or communicates a financial promotion, directly advises on or sells these products. The FCA made use of its product intervention powers to introduce the 12 month restriction in January.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

Firms should be aware of the permanent ban on the marketing of SISs to ordinary retail customers.

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Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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