CP20/8: High-risk investments: Marketing speculative illiquid securities (including speculative mini-bonds) to retail investors

Open consultation: CP20/8
18/06/2020
18/06/2020
Consultation closes
01/10/2020

We are consulting on making our temporary rules on marketing certain high-risk investments permanent and extending them to some similar securities.

Show CP20/8 (PDF)

Why we are consulting

We want to prevent harm to consumers from investing in complex, higher-risk products that they do not understand and are not suitable for them. Investing in these securities can cause unexpected and significant losses for retail investors. Our temporary product intervention (TPI) for speculative illiquid securities (SISs) came into effect on 1 January 2020 and lasts for 12 months.

It restricts speculative mini-bonds and preference shares from being mass-marketed to retail investors. It also improves disclosure of key risks and costs to the limited number of retail investors who are still eligible to receive promotions for them. We now propose making the TPI permanent, with a small number of changes. 

The harm caused by speculative mini-bonds is starting to migrate to some listed bonds, which are currently excluded from the TPI. We propose bringing these listed bonds under the TPI rules.

Who this applies to

This consultation is relevant to: 

  • issuers of SISs, including issuers of listed bonds with similar features to SISs which are not regularly traded
  • investment-based crowdfunding (IBCF) platforms and other intermediaries offering or otherwise providing services in relation to SISs
  • authorised firms which approve financial promotions for unauthorised persons issuing SISs (s21 approvers)
  • trade bodies for the IBCF sector
  • issuers and distributors of non-mainstream pooled investments (NMPIs) 

This consultation will also be of interest to: 

  • investment exchanges
  • consumers and businesses investing or considering investing in SISs
  • consumer organisations
  • businesses which rely on funding from SISs in the form of on-lending or investment using the proceeds of the issue

Background to this high-risk investment consultation 

When we published our TPI in November 2019, we set out the case for introducing marketing restrictions for SISs, including speculative mini-bonds. We were concerned that they were openly marketed online, despite being high risk and difficult for most retail investors to understand.

We now have the same concerns about listed bonds with similar features to SISs that are not regularly traded, which are not currently subject to the TPI.

We need to consult to make the TPI rules permanent and to extend them to relevant listed bonds. We also propose to make a small number of changes to the TPI rules, which are generally based on feedback we have received since publishing the TPI.

Respond to this consultation

Online response form

We are asking for comments on this Consultation Paper (CP) by 1 October 2020.

You can also:

  • complete our online response form
  • email your responses to [email protected] 
  • telephone: Andrew Anderson, 020 7066 4156

Please do not send us responses by post at this time.

Next steps

We will consider the feedback received and engage directly with stakeholders on these matters. Subject to the feedback, we aim to publish a Policy Statement before the end of 2020 and intend that the rules making the TPI permanent will begin on 1 January 2021.