RATESETTER has backed the Financial Conduct Authority’s (FCA) ban on the mass marketing of mini-bonds.
Mario Lupori, chief investments officer at the peer-to-peer lender, said the move would clean up the Innovative Finance ISA (IFISA) market.
The City watchdog used its product intervention powers to implement a ban from 1 January to 31 December 2020 and will consult on the rules in the first half of the year.
It means mini-bond providers, some of which offer IFISAs, will only be able to sell their products to sophisticated and high-net-worth clients.
This follows the collapse of mini-bond provider London Capital & Finance after the FCA found investors were misled into believing investments were ISA-eligible.
“We are delighted, what happened with LCF has to a small extent affected how people perceive a smaller space that we also provide an IFISA,” he said.
“We like that the FCA is once again making clear the mini-bonds and P2P are two different things.
“There was a risk of this tarnishing P2P.”
The ban will apply to more complex and opaque arrangements where the funds raised are used to lend to a third party, invest in other companies or purchase or develop properties.
There are various exemptions including for listed mini-bonds, companies which raise funds for their own activities or to fund a single UK property investment.
The FCA said it was making clear that these rules will not apply to P2P lending although there are other marketing restrictions being introduced next month.
It said it will also look out for regulatory arbitrage where firms try to highlight similar features.
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