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FCA launches investigation into mini-bond firm

Danger-Stop-Warning-Sign-700x450.jpgThe FCA has launched an investigation into mini-bond provider London Capital and Finance over concerns about the way it markets products.

LCF has also been told to cease all regulated activity and may not deal in any way with its assets including the money held in its banks accounts.

On 13 December the watchdog announced it had directed LCF to withdraw all of its existing marketing materials in relation to its fixed rate Isa or bond.

LCF is the issuer of mini-bonds it states it uses to make loans to corporate borrowers to provide capital for further investment.

The FCA estimates there are approximately 14,000 customers invested in LCF bonds and says its enforcement division is conducting the investigation.

A mini-bond is an unlisted debt security, typically issued by small businesses to raise funds.

The regulator points out issuing mini-bonds is not a regulated activity, so firms issuing mini-bonds do not need to be authorised by the FCA.

However it also says when an authorised firm approves a promotion for mini-bonds, they must ensure that it is in line with FCA rules, and that the financial promotion is fair, clear and not misleading.

This means, for example, that risks are appropriately communicated.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Great to see the whistle blowing really works. I notified the FCA early in December, well done the FCA.

    IFA’s have an obligation to notify the FCA, we will spot these before any other profession.

  2. Neil Liversidge 3rd January 2019 at 9:54 am

    @Phillip Rose: It must be a year at least since we blew the whistle on these people and got the customary non-response. Congratulations on supplying the straw that broke the regulatory camel’s back!

  3. So did I and I believe a number of others after a Facebook ad of theirs was shared on an IFA Facebook group

    • I suspect too many “investors” reacted to the ads in the Financial Press. Afterall, as many said “if it’s in the Telegraph or Times it’s got to be good, hasn’t it?”

  4. What have the company actually done wrong ?

    • I think as the story says LCF is an FCA regulated firm but the mini bonds in question were not (as I understand) a regulated product. It then comes down to how it was marketed, was it fair? It does not necessarily mean there is anything wrong with the actual bonds as such. I remember a Car Park scheme one like this and it had liquidity and default risk as this seems similar.

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