FCA warns consumers on high-risk securities under new regime
The Financial Conduct Authority (FCA) urges consumers to remain cautious about high-risk securities like mini-bonds and loan notes. This warning follows the implementation of a new Public Offers and Admissions to Trading regime on January 19, 2026, which sets new standards for public security offers.
New regime, enduring risks
The Public Offers and Admissions to Trading regime, effective January 19, 2026, establishes new rules for public security offers.
Securities, defined as financial instruments like shares or bonds, now include transferable and non-transferable debt securities such as mini-bonds and loan notes.
The FCA emphasizes that mini-bonds and loan notes are inherently high-risk.
Investing with unregulated firms significantly reduces consumer protection, as recourse to the Financial Ombudsman Service or the Financial Services Compensation Scheme is unlikely.
This makes it challenging for investors to recover funds if firms fail.
The FCA has previously warned against investing in risky schemes without fully understanding the associated dangers, noting instances where firms overstate capital safety and understate the real risk of losing money.
Limited powers, vital diligence
While the new regime grants the FCA additional powers, including over unauthorised firms, the regulator's ability to intervene remains limited.
The FCA therefore advises consumers to exercise diligence before investing.
Key recommendations include verifying the firm's authorisation using the FCA Firm Checker and assessing if the investment's risk level aligns with personal circumstances.
Consumers should understand that protections are greatly reduced with unregulated firms, potentially leading to total loss of funds.
Independent research from reliable sources like InvestSmart is crucial.
Diligence remains paramount
This FCA warning underscores the persistent challenge of high-risk investments despite new regulatory frameworks.
While the Public Offers regime aims to enhance market integrity, its impact on consumer protection against unregulated entities remains inherently constrained.
Investors must therefore prioritize individual due diligence, as regulatory oversight alone cannot fully mitigate the risks of losing capital in this segment.