FCA Permanently Ban Speculative Mini-Bond Marketing

The Financial Conduct Authority (FCA) has permanently banned mass speculative mini-bonds marketing to individual investors amid concerns over unexpected and severe consumer losses.

18 June, 2020 | AtoZ Markets – The FCA introduced a temporary mini-bonds marketing ban in January, fearing that it could harm individual investors. Moreover, the temporary ban was initially for 12 months. The FCA also determined that the risks of the mass mini-bonds marketing to individual investors are sufficiently “serious and immediate”.

FCA Bans Mini Bond Marketing to the Public

Today, FCA has decided to ban the mini-bonds marketing to individual investors permanently. It also proposed that some listed bonds with similar characteristics to speculatively illiquid securities that are not traded regularly be included in the ban. Interim Executive Director of Strategy and Competition at the FCA, Sheldon Mills said:

“We know that investing in these types of products can lead to unexpected and significant loses for investors. We have already taken a wide range of activities 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 ban, 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.”

The FCA has also proposed some exemptions to the ban, such as:

  • Regularly-traded publicly traded bonds,
  • Companies that raise money for its commercial and industrial activities, and
  • Products that fund UK income-generating real estate investments.

However, the FCA stated, ” the products caught by the rules can only promote to investors that firms are sophisticated or high net worth. Marketing material produced or approved by an authorised firm will have to include a specific risk warning. It will also have to disclose any costs or payments to third parties that are deducted from the money raised from investors.”

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