The Press and Journal (Inverness, Highlands, and Islands)

FCA looks to ban marketing of speculativ­e ‘illiquid’ securities


Pensioners deprived of decent savings rates for more than a decade will no longer be preyed on by unscrupulo­us investment schemes promising skyhigh returns, the UK financial watchdog has said.

The Financial Conduct Authority (FCA) announced plans to ban the marketing of speculativ­e “illiquid” securities, including products known as minibonds, to retail investors who have lost hundreds of millions of pounds in a series of high-profile failures.

For years amateur investors, especially those saving for retirement, have sought investment opportunit­ies that net them a better return than lowinteres­t products.

But thousands have been stung, losing most of their money in risky schemes.

One of the most highprofil­e cases is London Capital and Finance (LCF), which collapsed in January last year with £237 million of investors’ cash trapped inside.

The company had raised millions from around 11,000 investors, promising returns of up to 8%.

But a large portion of what LCF raised was used to pay its marketing agency, Surge Financial, leaving the company with even thinner margins to pay investors from.

These bonds are not covered by the Financial Services Compensati­on Scheme, so most bondholder­s will be left with little or nothing to show for investment­s they had hoped would see them through retirement.

Earlier this year Blackmore Bond – a similar scheme that invested in property projects around the UK – went bust, trapping the savings of thousands more investors.

The FCA temporaril­y banned the marketing of mini-bonds, effective from January 1 2020, late last year.

It has now proposed a small number of “changes and clarificat­ions”, which include bringing listed bonds with similar features that are not regularly traded within the scope of a permanent ban.

Sheldon Mills, interim strategy and competitio­n executive director, FCA, said: “By making the ban permanent we aim to prevent people investing in complex, high-risk products which are often designed to be hard to understand.

“Since we first introduced the marketing ban we have seen evidence that firms are promoting other types of bonds which are not regularly traded to retail investors.

“We are very concerned about this and so have proposed extending the scope of the ban.”

The new ban will allow only “sophistica­ted or high net worth” investors to be targeted by companies like Blackmore and LCF.

Firms selling bonds will also have to include a specific risk warning in their marketing and disclose any payments to third parties that are deducted from the amount raised from investors.

The FCA said the ban would apply to “complex and opaque arrangemen­ts”, where investment­s are used to fund a third party or constructi­on projects, or buy other investment­s.

Sellers will be exempt if they are selling listed bonds, which are easy to sell, raising cash for their own business or financing a single UK property investment.

“We aim to prevent people investing in highrisk products”

 ??  ?? REASON: The aim is to prevent people investing in complex, high-risk products often difficult to understand
REASON: The aim is to prevent people investing in complex, high-risk products often difficult to understand

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