View more on these topics

FCA to restrict sales of CoCos and mutual shares

The FCA plans to restrict the distribution of mutual shares to retail investors and tighten rules around the sale of contingent convertible bonds.

The regulator says shares issued by mutual societies “can carry risks which many consumers may be unfamiliar with”. These include a lack of liquidity and the absence of any guarantee to support dividends.

The FCA has proposed requiring mutuals attempting to raise capital using share instruments to ensure the investor has read specified risk warnings and committed not to invest more than 5 per cent of their net assets.

These requirements will only apply only to sales to retail investors who have not been certified as sophisticated or high net worth.

In addition, the regulator has decided to make permanent restrictions imposed on the distribution of contingent convertible bonds, known as ‘CoCos’, in August.

The FCA says: “CoCos are risky, highly complex financial instruments. The FCA believes they are unlikely to be appropriate for ordinary retail investors, so has stepped in to restrict their retail distribution to investors who are sophisticated or high net worth.

“Distribution to professional and institutional investors remains unrestricted.”

FCA director of policy, risk and research Christopher Woolard says: “One of our objectives is to ensure that consumers have the right degree of protection.

“That is why the new rules we are proposing will make sure that there are appropriate safeguards in place so these complex instruments are offered only to investors who are able to make informed decisions about them.”


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. “One of our objectives is to ensure that consumers have the right degree of protection.” To which one might add “And there’s certainly a long list of examples of how we’ve manifestly failed in the past to do so.”

    Still, you never know, the FCA, in its latest guise, may well be sincerely determined to achieve this objective than it did when it was the FSA.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm