Question to the HM Treasury:

To ask the Chancellor of the Exchequer, for what reasons the mini-bond market is not regulated by the Financial Conduct Authority.

It is not a regulated activity for firms to issue their own securities, including mini-bonds, due to an exemption within the Regulated Activities Order 2001. This exemption exists to ensure that companies in the real economy can raise finance to fund their business without having to become authorised by the Financial Conduct Authority (FCA).

However, to protect consumers, the marketing and promotion of such securities, including mini-bonds, are subject to the financial promotion restrictions set out in the Financial Services and Markets Act. This requires that the content of any financial promotion be approved by an FCA authorised firm unless an exemption applies. It is the responsibility of the FCA authorised firm to ensure the financial promotion is clear, fair and not misleading. Authorised firms that fail to meet these requirements may be subject to enforcement action by the FCA.

HM Treasury keeps the regulatory framework for financial services under review, and updates it as necessary. We are committed to maintaining a strong and safe financial system, with high standards of consumer protection. On 1 April, I announced that I will direct the FCA to launch an investigation into the events at London Capital & Finance, a firm which issued mini-bonds in order to fund loans that it made to other parties. This followed a request from the FCA Chair, Charles Randell, to launch such an investigation.