FCA takes action on sale of mini-bonds to retail investors

In the wake of recent financial firm scandals leading to investor losses, such as London Capital and Finance, the FCA has announced that it is going to use its powers to introduce temporary rules without consultation, to ban the promotion of ‘speculative illiquid securities’ to retail investors.

The FCA defines ‘speculative illiquid securities’ as ‘unlisted bonds and preference shares where the issuer uses the funds raised to lend to a third party, invest in other companies, or purchase or develop property’.

Promotion of these instruments will still be permitted to eligible high net worth or sophisticated investors.

The new temporary rules take effect from 1 January 2020, and the FCA intends to consult on permanent rules in the first half of next year.