Regulation  

Understanding FCA's ban on speculative mini-bonds

  • Identify the FCA's concerns about certain types of mini-bonds
  • Identify FCA's exemptions to permit promotion of speculative mini-bonds
  • Describe the implications following collapse of mini-bond issuer LCF
CPD
Approx.30min

The essential question is whether customers were actively advised that mini-bonds were a suitable investment.

LCF paid Surge Financial £58m to develop its online comparison sites promoting mini-bonds. 

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Given Surge’s reported turnover of £50m on last year, the extent of Surge’s involvement may be of interest to those investors unable to gain compensation from the FSCS.

For investors in LCF, the ban on retail sales of speculative mini-bonds comes too late. 

It is welcome news that robust action is proposed against those responsible for such devastating losses. 

Closer scrutiny of the actions of regulatory bodies which are supposed protect people is also welcome.

However, the mini-bond scandal is not over yet. 

Mini-bond investment firm Asset Life  - which has links to LCF - went into administration in July 2019, with several million pounds missing, leaving 500 investors out of pocket. 

The devastating consequences of the ineffective regulation of mini-bond schemes are now clear. 

At last, it seems that the government and regulators are determined to intervene robustly in the sector. 

Yet the warning signs were there for years. The real shame is that it took a scandal involving almost a quarter of a billion pounds of ordinary people’s money to prompt effective action.

Bambos Tsiattalou is the founding partner of Stokoe Partnership Solicitors

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. True or false, LCF needed to be regulated because it issued mini bonds.

  2. How does the FCA refer to speculative mini bonds in its handbook?

  3. Pick the odd one out. Speculative mini bonds are issued for:

  4. True or false, an exemption to permit the promotion of speculative mini-bonds in respect of less risky investments is where mini bonds are issued by a property holding vehicle to purchase or construct an income generating property in the UK.

  5. Pick the odd one out. Other exemptions include, promoting speculative mini bonds to:

  6. According to Bambos Tsiattalou why should those promoting investments which avail of an exception under the new rules tread carefully?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Identify the FCA's concerns about certain types of mini-bonds
  • Identify FCA's exemptions to permit promotion of speculative mini-bonds
  • Describe the implications following collapse of mini-bond issuer LCF

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