Financial Conduct Authority  

Bailey pledges 'fast' action on mini-bond ban breaches

Bailey pledges 'fast' action on mini-bond ban breaches
 Andrew Bailey, chief executive of the FCA

The chief executive of the Financial Conduct Authority has committed to acting quickly against firms in breach of its ban on mini-bond marketing. 

Earlier today (November 26) the regulator announced a temporary ban on the marketing of mini-bonds to retail investors, following increased scrutiny from MPs and the public after the high-profile collapse of provider London Capital & Finance earlier this year.

Speaking with FTAdviser Andrew Bailey, chief executive of the FCA, said the watchdog would aim to take initial action "very quickly" against any firm in breach of the newly-introduced ban. 

Mr Bailey said: "What I would expect, but it would depend on circumstances, is in the first instance we would stop any further marketing activity and secondly we would asses whether we would conduct an investigation and take formal action against them. 

"The first step we can move fast on. We are well established and we do it quite often in various parts of our landscape, where we have moved fast to restrict future activity.

"And then we obviously conduct the investigation of what has happened. We can never predict or predetermine how long the second part is going to take because it just depends on the circumstances." 

The ban is set to come into force on January 1, 2020, for 12 months, with the FCA stating it had found the risk to consumers was sufficiently "serious and immediate" to justify its intervention without consultation. 

Under the ban unlisted speculative mini-bonds can only be promoted to sophisticated or high net worth investors and any marketing material produced or approved by an authorised firm will need to include specific risk warnings and disclose any payments to third parties.

The FCA has come under increased scrutiny in this area of the market this year following the collapse of mini-bond provider LCF, which fell into administration in January putting the funds of more than 14,000 bondholders at risk.

In December last year the FCA had ordered London Capital & Finance a to immediately withdraw its promotional material with concerns the marketing was "misleading, not fair and unclear" and the following month froze the company's assets. 

London Capital & Finance allegedly signed clients up to fixed-rate Isas promising 8 per cent interest, with investors' capital then invested into mini-bonds used to issue loans to small businesses.

There have been calls for Mr Bailey to step down as a result of the regulator's handling of the issue, which is now subject to an independent review.

In the regulator's annual report and accounts for 2018/19 published in July the FCA confirmed the fate of Mr Bailey's bonus would depend on the outcome of the review.

rachel.mortimer@ft.com 

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