From 1 January 2020 the FCA has banned the promotion of 'speculative mini-bonds' to retail clients, unless they are considered sophisticated or high net worth investors. The FCA's ban makes it clear that these products are not likely to be suitable for the vast majority of retail clients.
There is no legal definition of a 'mini-bond', but the term usually refers to speculative, illiquid debt securities marketed to retail investors. These investments can be high risk because they are usually issued by small or start-up companies, or those that find it difficult to raise funds from institutional investors. They usually do not have a secondary market so can't be sold on. Investors are usually locked in until the bond matures, and could experience delays in interest payments or a complete loss of capital where the issuing company is unable to make repayments due to cashflow problems or company failure.
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