Mini-bond firms banned from mass-marketing risky investments

Small-time investors who have lost millions of pounds in failed schemes will no longer receive adverts for so-called mini-bonds, after the City watchdog banned the mass-marketing of some investments.

The Financial Conduct Authority said it would permanently ban the marketing of speculative illiquid securities to retail investors.

It means that so-called mini-bond schemes will be unable to put adverts in front of normal pension savers, and makes permanent a ban that has been in place since January.

Marketers had often in the past targeted small investors desperate for somewhere better to stash their savings than a bank account.

They found a receptive audience as interest rates remained at very low levels following the financial crash a decade ago.

But the schemes came with risks, which are sometimes designed to be difficult to understand, according to the FCA.

Around 11,000 bondholders, many elderly people investing retirement money, were left trapped in London Capital & Finance when it collapsed early in 2019.

Between them they owned around £237 million worth of bonds, money that many will never get back.

A year later, Blackmore Bond also entered administration, trapping tens of millions of pounds worth of investments.

Unlike the temporary rules, the new ban will also prohibit mass-marketing of some listed bonds that have similar features to speculative illiquid securities.

“We’ve today confirmed our proposals to make the speculative mini-bond ban permanent and extend its scope,” said Sheldon Mills, interim executive director of strategy and competition at the FCA.

“These products are high risk and are often designed to be hard to understand.

“Consumers should always be wary of any investment promising high returns while downplaying risks.”

The FCA has faced criticism from those who say it has not done enough to protect people and clamp down on murky practices within the industry.

An independent inquiry into its handling of London Capital & Finance was concluded last month. It has not yet been published.