Minibonds - still a problem, or problem solved?

A reminder of the past…

On 30 July 2026, the FCA published a Final Notice in which it censured Equity for Growth (Securities) Limited (EFG) which is now in liquidation. Were it not for the fact of the winding up order, the FCA would have imposed on EFG a financial penalty.

As an authorised firm, EFG was able to approve financial promotions on behalf of unregulated firms that were seeking to raise money through the issuance of minibonds. The Final Notice acknowledged that issuance of minibonds is not a regulated activity under the Financial Services and Markets Act 2000 (FSMA) and therefore not subject to the FCA’s rules. However, any financial promotions related to the minibond business were subject to the FCA’s financial promotion rules.

Between January 2018 to 31 August 2019, EFG had approved seven financial promotions – namely “Information Memoranda” on behalf of four unregulated minibond issuers. The financial promotions were then used by EFG’s Appointed Representatives (ARs) and other introducers to promote the minibonds to prospective investors, for which they charged a range of commission fees. The commission fees, being a percentage of the total amount of investor funds raised, were a fixed percentage of 15% in one case and in a range of up to 20%, 24% and 27.5% respectively in the three other cases, depending on how much was subscribed. These were paid out of the investor funds raised. None of the seven Information Memoranda approved by EFG and promoted by its ARs and other introducers disclosed any information about the level of commission fees, or how they were paid.

The FCA states that EFG knew at the time of approval of the seven financial promotions investors were at risk of paying significantly high levels of commission fees, and that it was not possible to tell investors exactly how much commission they would have to pay, until the minibond was fully subscribed as some of the commissions were calculated not on a fixed percentage basis but in a range up to maximum levels. and that EFG failed to ensure that the promotions were fair, clear and not misleading in accordance with the FCA’s COBS rule.

In particular, investors that invested directly with the unregulated minibond issuer should not have incurred any commission fees as no ARs or other introducers were involved in promoting the investment in these circumstances. However, because of the way commission fees were deducted as an aggregate from the overall investment fund, these direct investors were in fact contributing to the payment of any commission fees associated with the investment; and

The FCA conclude that failings resulted in investors being unable to make an informed decision or accurately assess the risk in investing in the minibonds as they did not have an accurate picture of the investment overall, the risk to their capital being repaid or the likelihood of receiving the stated returns. Significantly, in the case of those investors who invested directly with the unregulated minibond issuer (rather than through introducers), they had no knowledge that they were in effect subsidising the commissions paid by those investors who had been introduced by the ARs and the other introducers.

It is now some years since the collapse of London Capital & Finance (LCF) and Dame Elizabeth Gloster’s subsequent report which criticised the FCA’s handling of LCF. LCF raised £237 million from more than 11,600 investors by issuing minibonds before going into administration in 2019.
 

What has changed?

In 2020, the FCA introduced a temporary ban on the sale of “speculative illiquid securities” to ordinary retail investors, the scope of which was designed to cover minibonds. That ban was made permanent in 2021. It is currently to be found in COBS 4.12B.6. However, exemptions apply for certified high net worth investors, certified sophisticated investors and self-certified sophisticated investors.

In September 2025, the FCA warned they were concerned people were being encouraged to invest in high-risk schemes offered by unregulated firms without appreciating the risks involved.

We continue to read about other unregulated firms collapsing where they raised funds through issuing loan notes.

In January 2026, the new Public Offers and Admissions to Trading Regulations 2024 came into force, expanding the scope of relevant securities covered by the public offers regime to cover certain types of non-transferable securities (NTS) such as minibonds.

At the same time, the FCA nevertheless warned that while the types of securities within scope of this regime would now include non-transferable debt securities (including minibonds and loan notes), the nature of minibonds and loan notes makes them high-risk. They pointed out that if they are offered these types of investments from a firm not regulated by the FCA, there are generally fewer protections available such as through the FOS and the FSCS.

Most recently, on 20 August 2026, the FCA issued another warning “Unregulated loan notes and mini-bonds: don't risk your savings on promises of high returns”, referring to their ban on the marketing of speculative mini-bonds and loan notes to ordinary retail investors from 1 January 2021, but highlighting that “some unregulated firms may still try to sell them by using legal exemptions. You should be on alert if you’re offered these types of investments by someone not regulated by us. They may ask you to tick a box saying you are a sophisticated, experienced or high-net-worth investor before you can invest. Most people don’t meet these criteria.”
 

Problem solved?

There are certainly greater safeguards now in place to limit the risks of ordinary retail customer detriment flowing from investment in minibonds/loan notes issued by unregulated firms. At the same time, the FCA’s renewed warnings are clear.

It remains to be seen whether unregulated firms will adhere to the new public offer requirements/prohibitions applicable to NTS, and whether they will adhere to the ordinary retail investor marketing restriction, including applying the certified high net worth and sophisticated investor exemptions appropriately.

The FCA’s own warnings suggest they do not think it is a case of “problem solved” and that retail investors are still at risk.

It feels like there is regulatory lacuna that has still not been filled.