What’s happening?
How did failed mini-bond firm Basset & Gold plc’s potentially misleading adverts slip the net, despite the FCA’s financial promotion rules meaning they should have been checked? After the West Ham shirt sponsor became, in April 2020, the latest mini-bond firm to go bust and lose 1,800 ordinary investors £36 million, there is pressure on the FCA to review how the bonds were sold and why checks and balances failed.
The risky mini-bonds were at one point promoted in a way that targeted pensioners looking for a safe income from their cash savings, but much of investors’ cash in fact ended up in a payday loan firm called Uncle Buck Finance.
In the firing line is Basset and Gold’s principal firm, which was supposed to check up on its appointed representative marketing, but wrote to investors just six days after its insolvency saying it accepted no responsibility for their losses. This was despite the fact the Financial Services Compensation Scheme found that mini-bonds sold to investors at the same time were mis-sold. During the period from February 2017 to February 2018, promotions appeared using the strapline ‘Pensioner Bonds are back’, which raises questions about how the bonds were marketed and sold to everyday investors at that time.
Not until intermediary B&G Finance made improvements to its advertising in December 2018 and wrote to all bond holders in January 2019 clarifying that B&G had used ‘the vast majority of bond proceeds to finance a large facility agreement with an FCA-regulated short-term consumer lender’ was the true use of the monies raised made clear.
What do you need to do?
Firms dealing with mini-bond promotions directly or via a principal/AR relationship need to be aware that following the significant mis-selling and promotional concerns raised recently around providers Basset and Gold, London Capital & Finance and Blackmore Bond, the FCA’s focus is well and truly on this area.
Since 1 January 2020, the FCA’s rules have banned the promotion of ‘speculative mini-bonds’ (where a company raises money from investors with the intention of lending it to a third party or investing in other companies, or in property) to retail consumers, unless an investor is considered to be sophisticated or to have a high net worth.
How can we help you?
If you’d like to know more about best practice for financial promotions, for mini-bonds or other products, or any other aspect of FCA compliance, our expert team is here to help. Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.