will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Image of Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 26/11/2019
a dial labelled risk pointing towards the higher end

News contents

The Financial Conduct Authority (FCA) has announced today that it will ban the marketing of mini-bonds to retail customers. This ban starts from the 1 January 2020 and will last for 12 months while the FCA consults on future permanent rules.

The regulator has intervened after multiple failures in the mini-bond market, with thousands of customers losing millions of pounds due to the failure of firms issuing these speculative products.

The FCA has chosen to ban the promotion of these products as the firms who issue mini-bonds are usually not authorised by them, however, the regulator can take action against regulated firms who promote, sell or give advice about these investments.

Today’s ban affects those mini-bonds that are more complex and are used to lend to a third-party for investment into other companies or for the purchase and development of properties.

Some types of mini-bond will continue to be promoted, including listed mini-bonds, those to fund a firm’s direct activities (not including those listed above) and as a loan for the development of a single property.

Why would savers consider mini-bonds?

Savers are finding it harder to find attractive savings rates. Interest rates of 6%, 8% and 11% have all been promoted for mini-bonds, as has their name as a ‘bond’ and sometimes even as an ‘ISA’. This combination of a leading rate and form of promotion may have fooled savers into believing these were akin to more traditional cash savings accounts.

What has gone wrong in the mini-bond market?

The mini-bond market, and its associated failures, dates back years. The combination of unauthorised firms and poor marketing practices has led many retail savers to deposit their funds into accounts they might not have otherwise selected. In some cases, funds raised from mini-bonds were not used for their intended purpose.

During the past 12 months, the FCA has investigated more than 80 cases of regulated activities being carried out without the correct authorisation and over 200 cases of marketing activities that have not complied with its rules.

In 2013, 937 investors saved into a mini-bond called Secured Energy Bonds, promoted by Independent Portfolio Managers (IPM). This offered returns of up to 6.5%. Two years later, the investment failed, and savers lost £7m. Following this, 500 savers undertook a four-year legal battle to get £5m returned via the Financial Services Compensation Scheme (FSCS). In 2014, IPM marketed a mini-bond from Providence Financial, again this failed in only a year, with savers losing £8.2m – investors have now had £5m returned to them.

Last year, the Financial Ombudsman Service received around 400 complaints about IPM after they lost investors over £15m through mini-bond investments.

In January this year, London Capital and Finance (LCF), which had 11,500 savers with a total of £236m, collapsed and went into administration. LCF promised returns of up to 11% on their mini-bonds and marketed their mini-bonds as tax-free ISAs – suggesting they were more like a traditional cash ISA rather than a more complex and risky investment product. Investors wait to see if administrators can recover their savings from the sales of the firm’s assets. It’s estimated they may only get back 20% of what they originally invested.

Harewood Associates failed in June this year and, as a result, it left 1,400 savers who invested £32m set to receive between zero pence and 16p per pound invested returned.  

Calls for internet search providers to take down fraudulent investment websites

The regulator has seen a growing number of fraudulent marketing promotions for mini-bonds, with no attempt to meet financial promotion rules. As part of its announcement today, the FCA is calling upon internet search providers, including Google, to act against sites identified as breaking the law or regulations.

Mini-bonds remain open for high net worth investors

Today’s ban only applies to retail consumers, which means those who earn more than £100,000 or have net assets in excess of £250,000 (excluding their main home and pension withdrawals) can still choose to invest in a mini-bond, as long as they sign a declaration stating they understand the risks of the investment.

If you are considering a mini-bond then you should seek independent financial advice. In addition, while mini-bonds are not regulated, any advice given by an authorised adviser will be.

What is a mini-bond?

A mini-bond is where an investor deposits their savings to an issuer firm, who then lends the money to another organisation. This type of investment is illiquid, which means they cannot easily be sold on. The investor may not be able to divest the investment before maturity or if they do it may be at a loss. If the issuing firm goes bust, then the investor’s funds are at risk.

Are mini-bonds risky?

Mini-bonds are riskier than a fixed rate bond or cash ISA. As these are not regulated products, they do not come with protection from the FSCS if the firm goes bust.

Issuers of mini-bonds are usually small businesses or start-up companies who struggle to raise funds from institutional investors. As with many small businesses, managing cash flow can be difficult and even cause the firm to fail.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

Cookies will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be ScamSmart. will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be ScamSmart.