Where did you hear about us?
The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Financial Promotions Towards Investors

Richard Bowser reports

In recent years a number of failed investment schemes directly promoted towards private investors led to HM Treasury running a consultation process, which ended in March 2022 and as of 1st February this year, new regulations are in place of which all property investors, developer and promoters need to take note.

HM Treasury and the Financial Conduct Authority (FCA) have done this because they concluded that some investors do not understand or fully engage with the information that is presented to them when engaging with financial promotions, including the statement that potential investors are required to sign to then be classified as high net worth or sophisticated investors.

While FCA regulated firms can, and in some circumstances must, classify investors as high net worth or sophisticated, unauthorised firms are allowed to market certain investments to retail investors where the financial promotion is exempt. The most commonly used exemptions are for investors who are either high net worth or sophisticated.

As a result, both HM Treasury and the FCA believe that some investors may incorrectly certify themselves and/or not understand the regulatory protections they are giving up when receiving financial promotions which are subject to the exemptions.

One example in particular, which resulted in thousands of investors collectively losing millions was LCF. This was a Financial Conduct Authority (FCA) authorised firm which issued unregulated non-transferable debt securities, commonly known as ‘mini-bonds’. LCF went into administration in January 2019 and at the point of failure some 11,625 individual bondholders had invested around £237million. 

Want the full article?