FCA is consulting on marketing of speculative illiquid securities including speculative mini-bonds. It wants to make its ban (which it introduced in January without consultation) on mass marketing of these products to retail investors permanent.
The consultation seeks views on its proposal to make the ban permanent, and also makes some changes to the current ban, including bringing within its scope listed bonds with similar features to speculative illiquid securities and which are not regularly traded.
The ban will apply to the most complex and opaque arrangements where the funds raised are use to lend to a third party, to acquire investments or to buy or fund the construction of property. The ban will not cover listed bonds that are regularly traded, companies raising funds for their own commercial or industrial activities, or products that fund a single UK income-generating investment.
The effect of the ban will be to allow marketing of covered products only to investors that firms know are sophisticated or high net worth – and then only with significant disclosure and risk warning requirements.
FCA comments that its powers over unregulated issuers of these products is limited, hence its focus on those who distribute them.
FCA seeks comments by 1 October. The current temporary ban is due to end at the end of the year, and the permanent ban would replace it.