PIMFA welcomes proposed permanent FCA marketing ban for mini-bonds

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PIMFA, the trade association for the wealth management and financial advice industry, has welcomed the Financial Conduct Authority’s (FCA) announcement that it intends to make the ban on marketing of so-called mini bonds, introduced in January, permanent.

PIMFA says that in an era of ultra-low interest rates it is understandable that some consumers will be attracted by investments that purport to offer returns far in excess of the rest of the market but the risk that such investments carry is often much higher than those invested in them are aware of. All too often consumers are told such investments are low risk, while offering high returns. Moreover, such products are not always marketed to sophisticated or high-net-worth investors. More often they are marketed to those on lower incomes or inexperienced savers.

Tim Fassam, Director of Policy and Government Relations at PIMFA, says: “PIMFA has been concerned about the marketing of mini-bonds for some considerable time and there have been a number of notable examples of consumers being ill-treated. The announcement today from FCA that it intends to permanently ban the marketing of mini-bonds, as well as extending this to listed illiquid assets is welcome.

“It cannot be right that 14,000 people who invested in an Individual Savings Account (ISA), with London Capital Finance (LCF) for example, are now having to seek compensation, which well-run firms will pay through the Financial Services Compensation Scheme (FSCS) levy.

“PIMFA has repeatedly called for the marketing of these types of investments to be banned outright. The fact that this hasn’t happened sooner has, by its own admission, meant the FSCS has had to budget GBP45 million to compensate consumers. This could have been avoided and goes right to the heart of the debate over the current limits of FCA supervision.”