The Financial Services Compensation Scheme (FSCS) has announced that at least some of the people who invested with a mini-bond issuer firm will get compensation.

Mini-bonds are not regulated by the Financial Conduct Authority (FCA), so when the firm collapsed in January 2019 it was initially believed that none of the firm’s customers would receive any redress via the FSCS.

However, giving financial advice is regulated by the FCA so it has been announced that some customers who received advice from the firm will now get their money back.

Initially it has been confirmed that the 159 bondholders who switched from stocks and shares ISAs to mini-bonds will now receive compensation from the FSCS. This redress will be paid before the end of February 2020 and the affected customers do not need to take any action.

In due course, the FSCS will invite any other customers who think they may be in line for compensation to submit their claim. Essentially this means that claims will be invited from bondholders who think they may have received advice as opposed to just being given information about the product. FSCS says it hopes to start reviewing these claims in the first quarter of 2020 and to be in a position to issue a further update by the end of February. It adds that “FSCS acknowledges that many customers were given incorrect information about investing in [name of firm] bonds, [but] being given incorrect information on its own does not constitute misleading advice.”

One of the most controversial aspects of this announcement is that many customers did not receive advice to invest in the mini-bonds but claim that they were told that the products did enjoy FSCS protection. Customers in this situation will not receive any redress from the FSCS.

The FSCS has also confirmed that the 283 customers who dealt with the firm before June 7 2016 – the date on which it became authorised by the FCA – will definitely not receive any compensation from the Scheme.

Around 11,600 bondholders purchased a total of 16,700 bonds from the firm, and collectively these bonds are worth £237 million. The customers who do not qualify for FSCS protection will need to submit a claim to the administrators Smith & Williamson, and latest predictions say that they may receive compensation of between 20% and 25% of their investment.

Caroline Rainbird, FSCS CEO said:

“I regret that [name of firm’s] investors impacted by the firm’s failure have been waiting several anxious months to find out whether or not they may be eligible to receive compensation from FSCS.

“In reaching this stage, it was essential we carried out a thorough factual and legal analysis. To assist our ongoing investigations, we have received over 7,000 questionnaires and obtained thousands of telephone recordings and a vast number of emails. We have also taken legal advice.

“I appreciate that the initial decisions and outlook we are announcing today are likely to be disappointing to many [name of firm] customers. We are, however, working as quickly as we can to establish a suitable process for determining customers’ claims, and expect to be in a position to start this process in the next few weeks.”


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