FCA restriction on the promotion of mini-bonds

The FCA has announced a temporary ban on the promotion of speculative mini-bonds to ordinary retail consumers.  You can read the press release here. 

Issuing these products is not a regulated activity. However, the FCA can take action when an authorised firm approves or communicates a financial promotion, or directly advises on or sells, these products. So the FCA has made use of its product intervention powers to introduce this restriction which will come into force on 1 January 2020 and will last for 12 months while the FCA consults on making permanent rules.

The FCA is ‘very concerned about the risk of consumer harm in this area’. Given current low interest rates, the idea of 8%, 10% or even 12% return can seem very tempting to investors – and advisers. However, these products are very high risk, and consumers could lose a good chunk of their investment.

What is a mini-bond?
The term mini-bond refers to a range of investments. The ban will apply to more complex and opaque arrangements where the funds raised are used to lend to a third party, invest in other companies or purchase or develop properties. There are various exemptions including for listed mini-bonds, companies which raise funds for their own activities (other than the ones above) or to fund a single UK property investment.

What does the ban mean?
The FCA’s ban will mean that unlisted speculative mini-bonds can only be promoted to clients that firms have assessed as sophisticated or high net worth, or who have self-certified as such in line with COBS 4.12.

Marketing material produced or approved by an authorised firm will also have to include a specific risk warning and disclose any costs or payments to third parties that are deducted from the money raised from investors. 

The new restrictions will be set out in the FCA Handbook.

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 ban on the marketing of speculative mini-bonds to ordinary retail consumers which expands the restrictions already in place in relation to the promotion of non-mainstream pooled investments.

Those rules are found in COBS 4.12. Promotion to retail clients who have been assessed, or who have self-certified, as high net worth or sophisticated is permitted.



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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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