Mini-bond investors could lose everything

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.