The aftermath of the collapse of London Capital & Finance in 2019 meant that the issuing of mini-bonds has received an increasing level of scrutiny from regulators and the UK government.
With over 11,600 retail investors left trapped, the Financial Conduct Authority (FCA) was forced to take steps to ban the marketing of these types of products to the consumer market.
But, according to a Freedom of Information (FOI) request to the watchdog, the LCF case was not a one off, as it revealed that firms involved in the distribution and/or issuance of mini-bonds have increasingly failed.
According to FCA data, the number of businesses that went into liquidation/administration is at least 25:
- Three in 2018;
- Seven in 2019;
- 10 in 2020; and,
- Five in 2021.
But mini-bonds are not regulated products, so the watchdog admitted it does not “routinely collect data from firms on their issuing/distribution of these products”.
Additionally, the FCA noted that these companies may have gone into liquidation or administration not as a direct result of their involvement in the mini-bond market; “there are many factors, like the global pandemic, that could have been why a firm has failed”.