Broken bonds - the FCA clamps down on firm promoting mini-bonds

21 November 2017. Published by David Allinson, Partner

According to a recent article in Citywire, the FCA has ordered a firm promoting mini-bonds to "cease all regulated activity" following a series of losses being incurred by investors in respect of mini-bonds.

According to Citywire, Independent Portfolio Managers (IPM) has been ordered to cease all regulated activity. This followed their promotion of two mini bonds issued by a US Firm (Providence Financial) which caused investors to suffer losses of around £8.15 million.


This appears to be the latest development in what is a long running saga between the FCA and IPM. It appears from the Citywire article that there may be additional reasons (beyond the simple promotion of mini-bonds) as to why the FCA acted as it did ….. however, this does seem to tie in with our experience which indicates that the FCA does not like mini bonds much.


Mini-bonds (or non-readily realisable securities) are viewed by the FCA in general as high risk products (see their paper on crowdfunding published in February 2015 as an example). Whilst the question of risk will depend on the mini-bond in question, the FCA clearly has concerns about these products.


Despite this risk, in a time when income from fixed interest products remains low, we expect that investors will continue to see the returns offered by mini-bonds as being quite attractive. Accordingly, any firm involved in advising on such products should take careful note of the FCA's guidance.

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