The FCA has confirmed proposals to permanently ban the mass marketing of speculative illiquid securities, including speculative mini-bonds, to retail investors.

A temporary ban was introduced in January following what the regulator had described as “serious concerns” that speculative mini-bonds were being promoted to retail investors who neither understood the risks involved, nor could afford the potential financial losses.

The new rules will apply from 1 January 2021 and include changes to the temporary ban, following a consultation that the FCA launched in June.

This includes bringing listed bonds with similar features to other speculative illiquid securities, and which are not regularly traded, within the scope of the ban.

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

“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.”

Responding to the regulator’s announcement, Personal Finance Society chief executive, Keith Richards, said: “It is great to see the regulator take action to protect consumers. This permanent ban being extended makes sense as these products were being mass marketed when mini-bonds and similar listed securities aren't suitable for most retail investors.

“Some of these mini-bonds and securities were being marketed as offering returns of 6.5% to 8% a year. We would all urge anyone being offered returns that seem too good to be true to be aware that they probably are and to seek financial advice as to whether an investment is suitable for them.”

Share Story: