FCA Permanently Bans Speculative Mini-Bond Mass Marketing

The already imposed temporary ban will become permanent on January 1, 2021.

The United Kingdom’s Financial Conduct Authority (FCA) announced on Thursday that it is going to impose a permanent ban on the mass marketing of speculative mini-bonds.

The regulator already imposed a temporary ban on the mass marketing of these speculative illiquid instruments last January. The rules of the upcoming permanent ban will be similar to the temporary ones but with a small number of changes.

The temporary ban was imposed without any public or industry consultation, but the regulator launched a consultation in June before deciding to make it permanent.

According to the regulator, retail investors do not understand the risks involved with these financial instruments and could not ‘could afford the potential financial losses’.

The ban will come into effect on January 1, 2021, putting these bonds with other similar speculative illiquid securities. 

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“We’ve today confirmed our proposals to make the speculative mini-bond ban permanent and extend its scope,” Sheldon Mills, FCA’s interim Executive Director of strategy and competition, said. 

“These products are high risk and are often designed to be hard to understand. Consumers should always be wary of any investment promising high returns while downplaying risks.”

Additionally, the financial watchdog advised online platforms like Google to be more strict as most of the financial products are promoted to retail consumers through these platforms.

Protecting the Retail Investors

The British regulator prioritized minimizing retail investor risks in its 2020/21 business plan. It is actively flagging suspicious investment platforms, but its most notable step would be the ban on the retail sale of cryptocurrency derivatives.

Furthermore, the FCA’s European counterparts are becoming strict to cut the retail investors’ risks. Finance Magnates recently reported on the Dutch financial regulator’s decision to impose restrictions on the retail selling of turbo certificates, which can be seen as an alternative to CFDs.

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