The U.K.’s Financial Conduct Authority (FCA) is banning the sale of risky, illiquid securities to retail investors — and calling out tech giants for their role in enabling their distribution.
Amid investor protections concerns, the regulator implemented a temporary prohibition on a particular investment vehicle known as “mini-bonds” back in January. Now, the FCA will permanently ban the sale of speculative illiquid securities — including mini-bonds — to retail investors.
The new rules, which take effect Jan. 1, 2021, mean that these risky products can only be promoted to sophisticated, or high net worth, investors. The marketing material for these products will also have to include specific risk warnings.
“We’ve today confirmed our proposals to make the speculative mini-bond ban permanent and extend its scope,” said Sheldon Mills, interim executive director of strategy and competition at the FCA.
“These products are high risk and are often designed to be hard to understand,” he noted. “Consumers should always be wary of any investment promising high returns while downplaying risks.”
At the same time, the FCA warned big tech companies that they must take responsibility for their role in spreading shady investment schemes.
“The FCA has also made clear that online platforms, such as Google, play an increasingly significant role in communicating financial promotions to consumers,” the regulator said in a release.
“These firms need to do more to stamp out fraud and misleading adverts and bear clear legal liability for the financial promotions they highlight.”