The FCA has today extended the ban on mini-bond marketing - https://www.fca.org.uk/publication/consultation/cp20-8.pdf
Laura Suter, personal finance analyst at investment platform AJ Bell, comments:
“It’s good news for savers that the FCA has made its temporary ban on the mini-bond market permanent. This year’s tax-year end was notable in that people weren’t being bombarded with adverts for mini-bonds guaranteeing attractive interest rates and likening the risk to saving in cash accounts. Before the FCA introduced its temporary ban there was a flood of advertising, touting these unregulated products to the mass market and aiming to entice people who have grown weary of their cash savings earning next to nothing.
“Considering interest rates have seen two further cuts this year and there is a dearth of options for savers to earn a decent interest rate it feels certain that many would have been drawn into these products at the moment if marketing was more prevalent. And the fact is that most of these products aren’t suitable for the average person on the street: they aren’t regulated, they aren’t covered by the compensation scheme and they are higher risk than many other ways of investing.
“It was inevitable that the unscrupulous people attempting to sell these products to the mass market would transfer into marketing other products, so it’s good news that the regulator has extended the ban to other similar products. However, you only have to Google a few key terms like ‘high interest savings accounts’ to stumble across mini-bond or similar high risk offerings, meaning more still needs to be done to protect consumers.
“The move also means that the Innovative Finance ISA’s days must surely be numbered, with the FCA previously acknowledging that the ISA status of some of these mini-bonds has enabled them to be touted to a wider market. The regulator and Government are already looking at the suitability of the IFISA as part of the review into London & Capital Finance, and we would urge them to scrap the Innovative Finance ISA for the safety of savers.”
