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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.”


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  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.

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