FCA Bans Marketing of Speculative Mini Bonds


The UK Financial Conduct Authority, or FCA, had officially banned the mass marketing of speculative mini-bonds to retail customers. The ban came into force on January 1, 2020, and will continue for 12 months, as the regulator consults over permanent legislation.

02 January, 2020 | AtoZ Markets – The ban on the mass marketing of speculative mini-bonds to retail customers came into effect yesterday in the UK. The restriction, introduced by the Financial Conduct Authority, will last 12 months. And the regulator consults on the development of permanent rules.

Mini Bonds Marketing is Banned in UK 

The term “mini-bond” covers a series of investments. AtoZMarkets reported earlier the announcement of the ban. The prohibition applies to more complex and opaque arrangements. The collected funds are used to lend to a third party, invest in other companies or buy or develop properties. There are many exceptions, including for listed mini-bonds, companies. That raise funds for their activities (other than those mentioned above) or to finance a single UK property investment.

The FCA has limited powers over the generally unauthorized issuers of speculative mini-bonds. But it can take action when an authorized company approves or communicates a financial promotion, or advises or sells these products directly. In addition to this activity, there is an increasing incidence of promotions which are frauds or scams. And that does not involve any attempt to comply with the rules of financial promotion. The marketing ban does not apply to these frauds and scams because they are illegal anyway.

The ban is following the FCA’s conducting of an extensive program of work to tackle the risks for investors from mini-bonds. It reflected the real risk of harm to consumers during the last year.

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Over 200 Cases of Seemingly Improper Advertisement

The regulator investigated more than 80 cases of regulated activities. That could carry out without the appropriate authorization from FCA. And it assessed more than 200 cases of financial promotions that appeared to have violated FCA rules.

This restriction means that unlisted speculative mini-bonds can only be promoted to investors whose companies know they are sophisticated or have high net worth. Promotional material produced or approved by an authorized company must also include a specific risk warning and disclose costs or payments to third parties. That deducted from funds raised from investors.

Companies that approve financial promotions are already responsible for ensuring that these promotions comply with FCA rules.

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