Mini-bond in­vestors could lose ev­ery­thing

The Daily Telegraph - Your Money - - YOUR MONEY - James Con­ning­ton

In­vestors in two “mini-bonds” that of­fered re­turns of 7.5pc and 8.25pc are at risk of los­ing their money af­ter the is­suer, Prov­i­dence Bonds, went into ad­min­is­tra­tion. Just un­der 1,000 in­vestors are be­lieved to be in­volved, with a to­tal of more than £8m in­vested. As with pre­vi­ous mini-bond col­lapses, there was a warn­ing sign in the form of a late in­ter­est pay­ment ear­lier in the year.

The bonds are not covered by the Fi­nan­cial Ser­vices Com­pen­sa­tion Scheme, so whether any money is re­turned to in­vestors will de­pend on the abil­ity of the ad­min­is­tra­tors, Deloitte, to find and re­cover any as­sets.

Prov­i­dence Bonds, Prov­i­dence Bonds II and a hold­ing com­pany, Prov­i­dence Global, have all been com­pul­so­rily wound up by or­der of the Royal Court of Guernsey.

This fol­lows a linked US-based com­pany, Prov­i­dence Fi­nan­cial In­vest­ments, be­ing or­dered to cease trad­ing by Amer­i­can reg­u­la­tors in late Au­gust af­ter it was ac­cused of sell­ing fraud­u­lent se­cu­ri­ties.

Tele­graph Money has warned pre­vi­ously about the dan­gers of mini-bonds, which of­fer no FSCS pro­tec­tion and min­i­mal trans­parency. They also can­not be traded on the stock mar­ket, un­like the su­per­fi­cially sim­i­lar “re­tail bonds”.

The Prov­i­dence mini-bond doc­u­ments were ap­proved by In­de­pen­dent Port­fo­lio Man­agers, a com­pany reg­u­lated by the Fi­nan­cial Con­duct Au­thor­ity, which also ap­proved and acted as a trustee for the Se­cured En­ergy Bonds mini­bond, which col­lapsed last year, cost­ing in­vestors mil­lions.

IPM’s role in con­nec­tion with the Prov­i­dence mini-bonds is un­clear. The com­pany failed to re­spond to re­quests for com­ment.

Deloitte said it had writ­ten to bond­hold­ers and that it hoped to pro­vide a state­ment in the im­me­di­ate fu­ture “when there is a step in the le­gal process”.

More in­for­ma­tion for in­vestors is avail­able on its web­site.

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