The Financial Conduct Authority (FCA) has censured London Capital & Finance (LCF) for “unfair and misleading” financial promotions of minibonds.

LCF is insolvent and in administration, however, so the FCA has decided not to impose a financial penalty. The regulator said this would only divert funds that the administrators may use for the benefit of bondholder creditors.

Financial promotions were used by LCF to market minibonds to retail investors. These promotions presented a misleading picture of the minibonds and made them appear a far more attractive investment than they were, the FCA said.

Investors were also not told about the true nature of the minibonds, including the presence of hidden charges and the high-risk and unsustainable nature of the lending being carried out by LCF.

An investigation by the regulator found that LCF used bondholders’ money to fund seemingly independent comparison websites to showcase its minibonds next to safer investments, which had a lower rate of return. This had the effect of enticing retail investors into investing in LCF’s high-risk products. LCF also advertised the minibonds as “ISA compatible”, despite the FCA finding that this was not the case.

Joint executive director of enforcement and market oversight at the FCA, Therese Chambers, said: “LCF’s use of financial promotion led to bondholders, many of whom were vulnerable, investing in unsuitable, high-risk products.

“We recognise our censure will not provide solace to those investors who lost out. But it is important we set out what went wrong at LCF and how their promotions misled people into parting with their money.”

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