Ministers must go further to save investors from ‘rogue’ firms, say campaigners

The sale of risky unregulated investment opportunities by authorised financial firms must be banned to protect ordinary savers, campaigners have urged.

The Treasury this week said it intended to tighten industry rules following concerns that there was not a “strong enough safeguard” against unregulated financial firms whose adverts are misleading and unclear. At present, unauthorised firms can promote high-risk unregulated financial schemes as long as an authorised company approves the advertisements.

The Treasury has conceded that consumers may not be adequately protected and has proposed that authorised firms must pass a series of tests before they are able to approve such promotions. This would give the City watchdog, the Financial Conduct

Authority, much greater oversight of the industry. Today, any authorised company can sign off such promotions.

This initial step marks a victory for Telegraph Money, which has campaigned for policymakers to close investment loopholes that cost innocent investors tens of thousands of pounds. This newspaper, along with expert campaigners, now renews its calls to close a further gap and ban the sale of all unregulated investments by regulated firms.

Mark Taber, a financial campaigner, said the current regime harmed vulnerable consumers, who could easily confuse a bond approved by an FCAauthorised firm with dealing with an FCA-authorised firm. He urged the Government to go further to protect ordinary investors.

The issue of high-risk investments came into sharp focus after the collapse of London Capital & Finance in January 2019. The firm was able to boast of authorisation from the FCA, despite the fact that the risky “minibonds” it sold were unregulated. In this and other cases, investors were led to believe schemes were safe even though they were far too risky for most.

About 12,000 investors in LCF stand to lose £237m after the firm’s collapse, with the losses not covered by industry lifeboat schemes.

In addition to the LCF scandal, thousands of retirement savers have been persuaded to transfer their “gold-plated” final salary pensions into unregulated investments. As much as £6bn of savings has been transferred away from safer pensions into risky schemes.