The mini-bond ban will apply to the most complex and opaque deals where the raised funds are lent to a third party, to buy or acquire investments or to buy or fund the construction of property. There are exemptions such as regularly traded listed bonds, companies which raise funds for their own commercial or industrial activities and products which fund a single UK income-generating property investment.
Products caught by the FCA ban can only be promoted to investors that firms know are sophisticated or high net worth. Authorised firms will have to include in their marketing materials a specific risk warning and disclose any costs or payments to third parties that are deducted from the money raised from investors.
FCA’s powers are limited over issuers of speculative mini-bonds who are usually unauthorised, however the UK regulator will be able to take action when an authorised firm advertises a financial promotion of these products or directly advises on or sells them.
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