The Financial Conduct Authority (FCA) is to permanently ban the mass-marketing of ‘speculative illiquid securities’ – including mini-bonds – to retail investors from the beginning of 2021.

Many people have been attracted to high yields on offer yet didn’t realise the risks and that there is normally no protection under the Financial Services Compensation Scheme. Several mini-bond providers have collapsed in recent years and investors have lost their money.

‘Mini-bonds 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,’ said the FCA’s Sheldon Mills.

The FCA said protecting consumers was becoming trickier as fraudsters are increasingly using Google and other online platforms to market to would-be customers.

Investors need to be alert to potential scams. For example, Shares recently spotted a supposed 1-year mini-bond yielding 2.17%, allegedly issued by Danske Bank in Northern Ireland and being marketed by ‘Investec Client Services’ in Dublin.

Despite the extremely plausible documentation, which included a request for information under Anti-Money Laundering rules, Danske Bank confirmed it was not issuing such bonds, and Investec Bank agreed the promotion was false and that it was not marketing any new fixed-term deposit products.

The FCA has a section on its website on how to spot potential investment scams, and investors can check all details of offers they may have received here, in order to see whether the regulator is already aware of a scam.

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