FCA bans firms marketing ‘high interest’ mini-bonds to the public

The Financial Conduct Authority (FCA) will ban the mass marketing of mini-bonds to the general public.

The City watchdog said customers have been drawn in by claims of high interest, fixed over three to five years, but they can leave people with nothing at all if things go wrong.

FCA chief executive Andrew Bailey said: “We remain concerned at the scope for promotion of mini-bonds to retail investors who do not have the experience to assess and manage the risks involved.

“This risk is heightened by the arrival of the ISA season at the end of the tax year, since it is quite common for mini-bonds to have ISA status, or to claim such even though they do not have the status.”

a close up of a sign: The FCA said it's assessing more than 200 cases where financial promotions look like they broke the rules© Provided by Mirror The FCA said it’s assessing more than 200 cases where financial promotions look like they broke the rules

The ban comes into force on 1 January 2020, and will initially last a year while the FCA consults on making the rules permanent.

The ban applies to bonds where the money raised is then lent to a third party, invested in other companies or used to buy or develop properties.

Moira O’Neill from interactive investor said: “Savers are now in the unfortunate position where even if they can lock their money away for four years, they will only get 2% interest. So the prospect of lending money to a company via a mini-bond for a similar period and getting four times that amount, or more, is tempting.

“But mini-bonds are paying higher rates than bank accounts precisely because they do contain an element of risk – essentially the risk that the company could go out of business.

“And it’s often too difficult for customers to assess if are they paying enough to take that risk.”

Source: Mirror.co.uk

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