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Some of the UK’s best-known payday lenders have become insolvent in recent months, and if any more evidence is required of exactly how difficult it is to operate in this sector, three more firms entered administration between November 29 and December 10. Once again, it seems like a regulatory crackdown is the main reason why these firms have failed, with many lenders struggling to cope with the number of upheld complaints and the need to provide redress to disadvantaged customers.

The first firm, based in London, announced via its website that Paul Boyle, David Clements and Tony Murphy of Harrisons Business Recovery and Insolvency (London) Limited had been appointed as joint administrators.

The second firm, based in Bournemouth, and which also offered instalment loans and guarantor loans, is now in the hands of joint administrators Shane Biddlecombe and Gordon Johnston of HJS Recovery UK Limited. Earlier this year, this firm was instructed by the Financial Conduct Authority (FCA) to suspend lending activities after issues were identified with its affordability checks. Lending only resumed at this firm in September 2019, but media reports suggest that the firm’s investors withdrew their backing at this time due to the FCA’s action.

Finally, Chris Laverty, Trevor Patrick O’Sullivan and Helen Dale of Grant Thornton were appointed as Joint Administrators of a lender based in Slough.

At all three firms, new lending activity has ceased, and the administrators will now seek an orderly wind down of the firms and will attempt to recover the firm’s assets for the benefit of its creditors.

Customers with complaints against the firms should still approach their lender in the usual way and the administrators will treat all complaints as a claim being made by an unsecured creditor. There is no protection for payday loan borrowers offered by the Financial Services Compensation Scheme, and many customers of the lenders that failed earlier this year have said their compensation payouts were much smaller than they expected.

Customers with active loans should continue to make repayments in the normal way, as they could still damage their credit score and/or incur late payment charges if they cease paying.

The statements issued by each firm also state that a number of staff are still employed in customer service roles, and that the FCA continues to supervise the firms while they are in administration.

The Consumer Finance Association (CFA), a trade association that represents a number of short-term lenders, has called on the new government to ease the burden on its member firms.

CFA chief executive Jason Wassell said:

“The future of consumer credit continues to be uncertain. We do believe that the government must find solutions to stabilise the regulatory environment. We would be delighted if they could share some of their ‘certainty’ with us so that we can better serve our customers and introduce innovation.

“This is now the time to think strategically about the consumer credit that people will need over this next decade and how it should be regulated. There has been a big debate about creating a new economy. In that new economy, consumers will need products that suit their everyday credit needs. They deserve a regulated market that consistently delivers, rather than accessing de-regulated alternatives.”

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

In July 2019, the Financial Conduct Authority (FCA) commenced a user survey to seek feedback from firms on the Gabriel data reporting system. Since then, the regulator has held face-to-face meetings with some of the survey participants.

The key areas mentioned by respondents include:

• The speed of the system
• The support available to system users
• The layout of the schedules, i.e. the area of the system that sets out when returns need to be submitted
• The difficulties in viewing information submitted in previous returns
• Data validation processes

In the video on the FCA website, users’ comments include:

• “Anything that can be done to improve the functionality I think is the key part. So that makes life easier”
• “Autosave – best thing ever. Yes. And the fact that you’re listening to us and it’s going to make it more user friendly.”

The FCA will shortly introduce a new reporting system to replace Gabriel. The regulator promises that changes will be made to accessibility, notifications, the look and feel of the system, and automated saving of data when developing this system. It adds that it will improve the support guidance available to make it easier to know where to go for help; and that firms will be able to see the submissions they made via Gabriel when logging in to the new platform.

The FCA’s survey is still open, so firms can still tell the regulator about their experience of the Gabriel system and their ideas to improve it. Please note, however, that the FCA is not asking for feedback on the data it collects or the layout of the forms. The survey takes just five minutes to complete.

Failing to submit a regulatory return remains the most common reason why the FCA might cancel a firm’s authorisation. This is a particularly significant issue in the consumer credit sector, especially those in the motor trade for whom financial services would not be their main line of business.

Scott Robert offers confidential and no obligation advice about FCA regulatory reporting.

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

As of November 30, it is no longer possible to open a new Help To Buy ISA, which was introduced by the Government in 2015 to assist individuals to save to purchase a property.

Nationwide Building Society reported 300,000 applications in the final week, and 40% of their total number of HTB ISAs were sold in this seven-day period. Halifax says the number of applications in the final week was seven times greater than in an average week.

Contributions to existing HTB ISAs can be made until November 2029, and account holders can claim the Government bonus until the end of 2030.

Consumers wishing to take out a tax-efficient savings vehicle to help them get on the housing ladder may still be able to do so via a Lifetime ISA (LISA). Like HTB ISAs, LISAs also provide a 25% bonus from the Government, so if the account holder paid in the maximum of £4,000 in any one tax year, the bonus would be £1,000.

LISAs can be opened by anyone aged between 18 and 39, and contributions can continue to age 50. This means that if a customer makes the maximum contribution each year from age 18 to age 50 then the total Government bonus would be £33,000. The basic idea is that funds held in LISAs can be used either to assist with the purchase a home, or to save for retirement, although saving for retirement via a workplace pension is likely to be more advantageous. If funds are withdrawn for any other reason – retirement withdrawals are not permitted until age 60 – then a penalty of 6.25% of the contributions is payable.

Other features of the LISA tax wrapper include:

• The funds cannot be used for the purchase of a home if the purchase price is greater than £450,000
• They can invest in both cash and stocks & shares
• Even if the individual uses their full cash ISA allowance, they can still contribute £4,000 to a LISA in the same tax year
• They can be transferred to another provider

Nationwide’s director of savings Tom Riley said:

“We’ve seen unprecedented demand from potential first-time buyers looking to open a Help to Buy ISA before the 30 November deadline.

“While many are ready to start their journey to home ownership now by putting money aside on a regular basis, others are forward planning and opening the account ready for when they are in a position to start saving, knowing they have a decade to raise a deposit and claim the Government bonus. It’s a fantastic product and it is really encouraging to see people getting into the true spirit of saving at a time when home ownership remains a distant dream for many.”

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

The Office for National Statistics (ONS) has published new data showing that average household financial debt has risen by 11% in two years. However, much of the increase is accounted for by a rise in student debt and hire purchase debt rather than significant growth in credit card, payday loan or guarantor loan debt.

Data collected between April 2014 and March 2016 showed that total household financial debt was £107 billion, and this rose to £119 billion when the ONS looks at data collected between April 2016 and March 2018.

The mean household financial debt rose by 9% to £9,400 and median financial debt increased by 12% to £4,500.

The number of households where at least one person has some form of non-mortgage debt increased from 12.4 million in the 2014-16 study to 12.7 million in the most recent figures.

The poorest 10% of households have total debts which are three times larger than their total assets. Conversely, the richest 10% of households have assets that are 35 times larger than their debt. Over two years, the wealth of the richest 10% grew four times more quickly than the equivalent figure for the poorest 10%.

44% of UK adults say they see their debts as a burden.

Total household debt currently stands at £1.29 trillion, according to the ONS, and this represents a 4% increase over two years. This figure is significantly higher than the household financial debt figure as it includes mortgages and equity release debt.

Sarah Coles, a personal finance expert at financial firm Hargreaves Lansdown, was widely quoted in the media when they reported these ONS figures. Ms Coles commented:

“The figures are skewed slightly by the £32bn of student debts – which the vast majority of graduates will never pay back in full. However, even excluding that we’re carrying £87bn in loans, credit cards, hire purchase agreements, overdrafts and arrears.

“Not all these debts are the same: there’s a world of difference between taking an affordable, low-cost loan for vital home improvements, and living on your overdraft month after month. But if you’re one of the 44% of people who see their borrowing as a burden, it’s worth taking steps to deal with your debts.

“If you’re not shopping around for utilities, media, mobile, broadband and groceries it’s a good place to start. If you’ve already done these easy steps, you may need to make tougher decisions about lifestyle sacrifices you can make to cut costs. You can then use any money you free up to start paying off your most expensive debts.

“While you’re repaying, it’s pointless forking out more than you need to in interest, so consider switching somewhere like a low-cost loan or a credit card with a 0% introductory period, to save. The only proviso is that you can’t see this as an excuse just to spend more money or you’ll end up doing more harm than good.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

The Financial Conduct Authority (FCA) has called on authorised firms to examine their ‘operational resilience’ and to make changes and improvements to their procedures where necessary.

The FCA says the main considerations should be:

• Identifying the firm’s business services that, if the service was to be interrupted, could cause:
• Damage to the firm’s viability
• Detrimental outcomes for the firm’s customers
• Damage to market integrity
• Instability in the wider financial sector
• Setting ‘impact tolerances’ for each important business service, which set out the maximum tolerable level of disruption the firm is prepared to accept
• Identifying the people, processes, technology, facilities and information that support the firm’s important business services
• Making contingency plans to ensure the firm remains within its impact tolerances through a range of severe but plausible disruption scenarios
• Ensuring the firm’s contingency plans include a communications strategy which should ensure customers are kept updated during a disruptive event, for example a firm’s customers may need to know about alternative means of accessing the firm’s services
• Operating a ‘lessons learnt’ approach should a disruptive event occur so that the firm is better placed to respond to emergency events in the future

The FCA says firms should carry out an assessment of the above issues annually.

Strictly speaking, the new FCA consultation on operational resilience only applies to the following categories of firm:

• Banks
• Building societies
• Investment firms who are also regulated by the Prudential Regulation Authority
• Solvency II firms
• Recognised Investment Exchanges
• FCA firms who are subject to the Enhanced Senior Managers & Certification Regime
• Entities authorised and registered under the Payment Services Regulations 2017 and Electronic Money Regulations 2011

 

However, all firms need to be prepared for disruptive incidents, especially as the cyber threat continues to increase. Every FCA authorised firm needs to have a risk management strategy and every firm should have a documented Business Continuity Plan or similar, explaining how the firm will respond to an incident and how the interests of staff, customers and other stakeholders will be protected.

Other than cyber incidents, disruptive events a firm might experience include:

• Other IT failures – for example there have been many examples of bank customers being unable to access services for a period after the bank’s antiquated computer systems failed
• Data loss – again this is an issue where there have been many high-profile examples
• Loss of power, telecommunications or water
• Any incident that makes it very difficult or impossible to access the firm’s premises, such as weather events or fire damage

The FCA invites responses to its Consultation Paper – the deadline for submissions is April 3 2020.

In a speech on December 5, FCA director Megan Butler explained the regulator’s definition of operational resilience as “the ability of firms and [Financial Market Infrastructures] and the financial sector as a whole to prevent, adapt, respond to, recover and learn from operational disruptions.”

Ms Butler went on to give an example of unacceptable customer harm when she said:

“We will not accept operational failures that – but for a lack of sufficient contingency planning – see consumers stuck on the phone for hours trying to speak to their bank, unable to complete a house sale or purchase or facing uncertainty over whether they will be able to pay their rent on time because they cannot transfer their money.”

Andrew Bailey, FCA Chief Executive, said:

“It is in the public interest that a resilient financial system is able to supply the most important services with minimal interruption even during severe operational events. The proposed new requirements are aimed at achieving this outcome.

“Disruptive events can have a high impact on consumers and businesses so firms and [Financial Market Infrastructures] need to know where the risks to their service delivery lie and to make sure that they are prepared for any service disruption by testing their planned response.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

With the exception of a few niche areas such as benchmark administration, December 9 2019 was the date from which the Senior Managers & Certification Regime (SM&CR) applied across all sectors of UK financial services.

It means that firms from insurance brokers to payday lenders, claims management companies to pension advisers and debt managers to mortgage advisers are now subject to the three components of the Regime.

Senior Managers Regime

The Financial Conduct Authority (FCA) has automatically transferred all individuals who held approved person roles to senior management functions under the new Regime. The exception to this is senior managers in Enhanced firms, which the FCA defines as any firm that is:

• A large CASS firm – holding more than £1 billion of client money or more than £100 billion of safe custody assets; or
• A mortgage lender with more than 10,000 mortgages outstanding; or
• A firm which has had assets under management of £50 billion or more at any time in the last three years

Senior managers in Enhanced firms should already have applied to the FCA for approval, even if they have previously been part of their firm’s senior management team.

Where a firm wishes to appoint a new senior manager, they must apply to the FCA, who will assess whether that person is fit and proper to carry out such a responsible role. This requirement applies equally to Enhanced firms and other firms.

All existing and new senior managers will need a Statement of Responsibilities. Their firms should already have drawn up this document and its content should be reviewed regularly to ensure it remains up to date.

Certification Regime

The Certification Regime applies to individuals who are not senior managers, but who still have supervisory, management or customer-facing roles that means they could potentially cause significant harm to the firm or any of its customers. These individuals do not need to apply to the FCA for approval, and it now falls to their firms to carry out their own assessments to ensure these individuals have the qualifications, training, competence and personal characteristics to carry out the role. This assessment must be completed on an annual basis.

Conduct Rules

The Conduct Rules now apply to almost every employee of an authorised firm, and require employees to:

• Act with integrity
• Act with due care, skill and diligence
• Be open and cooperative with regulators
• Pay due regard to customer interests and treat them fairly
• Observe proper standards of market conduct

Additional Conduct Rules will also apply to Senior Managers and require them to:

• Take reasonable steps to ensure that the business of the firm for which they are responsible is controlled effectively
• Take reasonable steps to ensure that the business of the firm for which they are responsible complies with the relevant requirements and standards of the regulatory system
• Take reasonable steps to ensure that any delegation of their responsibilities is to an appropriate person and that they oversee the discharge of the delegated responsibility effectively
• Disclose appropriately any information of which the FCA, or Prudential Regulation Authority, would reasonably expect notice

Firms could perhaps incorporate the wording of these Conduct Rules into annual declarations of honesty and integrity and ask employees to read and sign these documents. Together they could potentially be the financial services equivalent of the medical profession’s Hippocratic Oath.

Authorised firms should notify the FCA whenever they take disciplinary action against an individual for a breach of the Conduct Rules.

Link to a news article that explains who might be a senior manager or hold a certification role; how a firm might carry out an annual competence review; and in what circumstances the FCA might take action against a senior manager

Link to a news article that explains how the Regime applies to claims management companies

Link to a news article that examines what lessons can be learnt from the banks, who became subject to the Regime three years ago

Link to a news article that explains what needs to be covered in a Statement of Responsibilities

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

Boris Johnson and the Conservatives can look forward to another five years in government after winning the General Election with a majority of 80.

The initial reaction to the result is to suggest that Brexit will happen, and the UK will exit the EU on January 31 2020. All of the Conservative candidates signed a pledge to vote in favour of the withdrawal agreement and the associated Brexit legislation when Parliament re-convenes.

The Conservatives based their campaign around the slogan ‘Get Brexit Done’. However, while January 31 2020 will be the official exit date, very little will change once February dawns. January will mark, not the ‘end’ of the Brexit process, but perhaps something closer to ‘the beginning of the end’. February 1 to the end of 2020 will be a ‘transition period’ where the UK’s existing trade relationship with the EU is maintained while the two sides negotiate a new long-term trade relationship. Mr Johnson has said the UK will conclude these negotiations by December next year, but senior EU figures have suggested that this represents an extremely ambitious timetable. This now means that a different sort of ‘no deal’ outcome is possible, where the two sides fail to reach agreement by the end of next year, but also fail to agree to extend the transition period.

Many commentators have suggested that the Prime Minister’s comfortable Commons majority could increase the chances of a softer final UK-EU deal, as Mr Johnson will not be hamstrung by the demands of small factions of MPs in his own party.

The Conservative manifesto also promises:

• No increases in income tax, VAT or National Insurance
• The National Insurance lower earnings threshold will rise to £9,500 in 2020. There is also ‘an ultimate ambition’, with no timescale mentioned, to raise this to £12,500
• The pension ‘triple lock’ – where the state pension rises by the highest of 5%, the Consumer Prices Index rate of inflation and average earnings growth – will be maintained
• A review designed to assist those who earn between £10,000 and £12,500 and who have been missing out on pension benefits because of a loophole affecting people with net pay pension schemes
• A review of the pension annual allowance taper – at present, for every £2 of adjusted income over £150,000, an individual’s annual allowance is reduced by £1
• EU migrants will only be able to access unemployment, housing, and child benefit after five years
• It will no longer be possible to claim child benefit for children living overseas
• A new market in long-term fixed rate mortgages to reduce the cost of deposits
• Corporation tax to remain at 19% – the party previously had a policy of reducing this to 17% in the longer term

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

As reported in The Times and other publications, one of the UK’s guarantor lenders has admitted that the Financial Conduct Authority (FCA) has requested that improvements are made to the firm’s procedures.

The regulator’s main area of concern appears to be whether lenders are fully explaining the risks of guarantor loans, including whether guarantors understand all of their responsibilities and whether guarantors fully understand exactly how likely it is that they will need to make one or more payments on the loan.

The lender in question has just published its half-yearly report. The picture painted by this report is one of a firm that is expecting their regulatory burden to increase: more complaints, more staff needed to service these complaints, more arrears, introducing new lending criteria, reducing repeat lending as a share of new business and additional FCA requirements likely to be announced in the future, such as the finalised guidance on the treatment of vulnerable customers.

The report speaks of the lender having adopted “a more conservative approach to repeat lending”. New lending accounts for 69% of the firm’s loan originations in the first half of the 2019/20 financial year, up from 62% in the same period in 2018/19. Indeed, in the second quarter of 2019/20 this figure is 78%. Proportions of repeat lending have suddenly dropped. They made up 39% of the firm’s originations in Q4 2018/19 and in Q1 2019/20, yet in Q2 2019/20 this is now 22%.

The firm wishes to make it clear that the FCA has not identified issues with the design of the guarantor loan product, nor does it have issues with the lender’s overall business model.

Its focus on reducing repeat lending appears to be a sensible approach to take. Some guarantor lenders are reporting that they are more likely to have complaints upheld by the Financial Ombudsman Service (FOS) when the complaint comes from a customer who took out several loans. For example, FOS might decide that for the later loans, the lender should have checked the borrower’s and guarantor’s income by requesting payslips, rather than simply accepting the income figure declared by the customer. Alternatively, FOS may decide that repeat lending should prompt the firm to conduct a detailed income and expenditure analysis, instead of using a ‘typical’ living expenses figure provided by the Office for National Statistics.

For a guarantor lender, a sensible and proportionate series of pre-loan checks might include:

• Emphasising to a guarantor that their liability might not be restricted to making one or two monthly payments that the main borrower might miss. The worst-case scenario is that the borrower stops paying completely, which means the guarantor would need to make every remaining payment, even if the loan still has several years to run
• Asking the guarantor to describe their responsibilities in their own words, rather than a member of staff simply reading out the guarantor obligations
• Giving both the borrower and the guarantor some time to consider the loan’s terms and conditions, rather than encouraging them to sign the agreement quickly
• Asking the nature of the relationship between the main borrower and guarantor, and how long they have known each other
• Checking that the guarantor trusts the borrower to make payments and is not aware of any financial difficulties the borrower might be experiencing

Lenders should also train their staff to identify any signs that a guarantor may have been pressured by the main borrower into agreeing to provide a guarantee.

When the FCA announced its rent-to-own price cap in March 2019, Christopher Woolard, the regulator’s Executive Director of Strategy and Competition, was to be found speaking on the record to the national press. He told The Times that he was not sure why guarantor loans had such high interest rates when guarantors were meant to have strong credit records. His comments may mean that guarantor loans are next in line for price capping.

Without providing any figures, the FCA has said that recent data suggests that the proportion of guarantors making loan payments on behalf of the borrower has increased. Debt charity StepChange says the number of people contacting them about guarantor loan-related debt problems more than doubled between 2016 and 2018.

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

The Financial Conduct Authority (FCA) has asked insurance advisers and brokers to be mindful of whether a policy provides significant added value to their clients before any insurance is recommended or arranged for them.

The FCA guidance document explains that the regulator is using a very specific definition of ‘value’ in this respect. Here it means the balance of the overall costs to the end customer and the quality of the product and services.

For example, a consideration of ‘value’ might include an assessment of:

• Whether the product is compatible with the objectives, interests and characteristics of the target market
• The cost and charges of the product itself
• The level of cover provided under the policy
• How claims are handled or how other services are delivered

A broker fee would not be included in this assessment as it is not part of the design of the product.

Insurance providers are expected to carry out this value analysis before they commence offering a product. Examples of relevant management information to assist in this analysis could, for example, include customer research, claims and complaints data.

One of the key areas the FCA warns firms to consider is the remuneration structure – does this result in the price paid by the client being well in excess of the risk price?

Where necessary, the regulator says firms may need to consider taking some of the following steps where it is identified that clients may not be receiving value for money:

• Making changes to the product
• Changing the target market
• Altering the distribution strategy
• Modifying the remuneration structures
• And, as a last resort, withdrawing the product from the market, if none of the above strategies would deliver good client outcomes

Although they do not design the product, the FCA expects insurance brokers and advisers to carry out their own value analysis. For example, a broker’s remuneration for arranging a particular policy could be sufficiently large to mean that the client does not receive a good value outcome.

Ways in which a broker may be able to identify evidence of harmful outcomes may include:

• From their direct interactions with customers
• By carrying out assessments of customers’ demands and needs
• Analysis of claims and/or complaints data relating to specific products

The guidance warns brokers to be particularly wary of three scenarios concerning remuneration:

• The broker firm receives a level of remuneration which is excessive when consideration is given to the costs or workloads they incurred in distributing the product
• The broker firm receives significant remuneration, but their involvement in the distribution chain provides little or no benefit beyond that which the customer would receive from the product anyway
• The remuneration arrangements incentivise the broker to propose or recommend a product which either does not meet the customer’s needs, or does not meet them as well as another product would

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

The Financial Conduct Authority (FCA) has taken steps to prevent firms promoting speculative mini-bonds to ordinary retail consumers. It wants to take this step now to avoid more consumers being encouraged to invest in mini-bonds via an Individual Savings Account when the peak ISA season arrives in the spring.

The main elements of the ban are:

• Mini-bonds can only be promoted to investors that firms know are definitely categorised as sophisticated or high net worth
• Marketing material produced or approved by an authorised firm will have to include specific risk warnings. These include “You could lose all of your money invested in this product”, “This is a high-risk investment and is much riskier than a savings account” and (where applicable) “ISA eligibility does not guarantee you returns or protect you from losses”.

The regulator’s product intervention powers allow it to impose a restriction such as this for a 12-month period, without the need for a formal consultation first. It is expected that the FCA will then consult on new rules which would make the ban permanent. In the meantime, the ban will come into force on January 1 2020.

The FCA clarifies that the ban applies to arrangements where the funds raised are used to lend to a third party, invest in other companies or purchase or develop properties. Listed mini-bonds and companies which raise funds for their own activities (other than those listed above) or to fund a single UK property investment fall outside the scope of the ban.

A mini-bond is not a regulated product, but activities such as issuing financial promotions for these products or advising customers on these products are certainly regulated activities, so the FCA is entitled to impose this ban.

The regulator adds that it is investigating more than 80 cases where it suspects that regulated activities connected to mini-bonds may have been carried out without having the right FCA authorisation; as well as more than 200 cases of financial promotions that appear to breach the FCA’s rules in this area.

The FCA says it is concerned that large numbers of consumers do not fully understand the risks of mini-bonds before choosing to invest in this area.

According to the FCA, the main risks associated with these products are:

• Exposure to high-risk, speculative assets
• High and/or concealed charges
• The complex nature of the product
• The fact there is no Financial Services Compensation Scheme (FSCS) protection

The FCA’s issues with firms’ promotions include:

• Implying or stating that high annual returns are guaranteed
• Implying or stating that the products are authorised by the FCA and/or protected by the FSCS
• Incorrectly stating that the product can be included in an ISA (where this is the case – some mini-bonds qualify for ISA status and some do not)
• Failing to clearly disclose costs and charges

Andrew Bailey, Chief Executive of the FCA said:

“We remain concerned at the scope for promotion of mini-bonds to retail investors who do not have the experience to assess and manage the risks involved. This risk is heightened by the arrival of the ISA season at the end of the tax year, since it is quite common for mini-bonds to have ISA status, or to claim such even though they do not have the status.

“In view of this risk, we have decided to complement our substantial existing actions with a further measure which will involve a ban on the promotion and mass marketing of speculative mini-bonds to retail consumers. We believe this will enable us to further consumer protection consistent with our regulatory principles and the FCA Mission.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article