The FCA's permanent ban on mass marketing speculative illiquid securities to ordinary retail investors took effect on 1 January 2021, but unregulated firms can still exploit exemptions. As the regulator warns, these high-risk investments can cost you everything, especially if the company fails, as seen with Woodville Consultants Ltd.
TL;DR · LAST REVIEWED 21 AUGUST 2026
- Mini-bonds and loan notes are high-risk, illiquid investments that can result in total loss.
- The FCA banned mass marketing these products to ordinary retail investors from 1 January 2021.
- Unregulated firms can still sell via exemptions, such as self-certifying as sophisticated.
- Investors typically lack access to the FOS or FSCS for these products.
- The FCA has issued over 1,200 warnings in 2026 and cites the failure of Woodville Consultants Ltd.
KEY FACTS
- The FCA permanently banned mass marketing speculative illiquid securities to ordinary retail investors from 1 January 2021.
- The FCA warned consumers on 20 August 2026 about loan notes and mini-bonds.
- The FCA cited the failure of Woodville Consultants Ltd, a litigation funder.
- The FCA has issued more than 1,200 warnings so far in 2026.
- Since January 2026, a new regime regulating offers of securities to the public has been in force.
If you are offered a mini-bond or loan note, stop and check the firm on the FCA register first. If you are asked to certify yourself as a sophisticated or high-net-worth investor, be very careful, as it can remove protections. If in doubt, do not invest.
What the FCA has warned
On 20 August 2026, the Financial Conduct Authority (FCA) issued a fresh consumer warning about mini-bonds and loan notes sold by unregulated companies, after continuing to see retail investors lose money in these high-risk products. The regulator cited the recent failure of Woodville Consultants Ltd, a litigation funder that raised money from retail investors through unregulated loan notes, as a case in point.
The FCA said it has issued more than 1,200 warnings so far in 2026, reflecting the scale of activity in this area. The warning is aimed at consumers who may be approached directly by firms offering what appear to be attractive investment opportunities. The regulator's concern is that many people do not understand the true level of risk involved in these products, which are often marketed as a way to earn a fixed return over a set period.
The FCA's statement was clear: these are speculative, illiquid investments, and people should not put money into them unless they fully understand the risks and can afford to lose everything. The regulator also reminded consumers that protections available for regulated investments do not apply to these products when sold by unregulated firms.
What mini-bonds and loan notes are
Mini-bonds and loan notes usually involve lending money to a company for a fixed period in return for interest. They are illiquid and speculative, meaning the money is tied up and there is no ready market to sell the investment before maturity. If the company fails, an investor can lose the entire amount invested.
These products are not the same as regulated corporate bonds or savings products. A regulated corporate bond is issued by a company that is subject to ongoing disclosure and governance requirements, and is typically traded on a recognised exchange. A savings product, such as a bank account, is covered by the Financial Services Compensation Scheme (FSCS) up to certain limits. Mini-bonds and loan notes from unregulated companies have none of these features.
The company borrowing the money may use it for any purpose, including speculative ventures such as property development, litigation funding, or other high-risk activities. The investor has no security over the company's assets, and there is no guarantee that interest will be paid or that the capital will be returned. The FCA has consistently described these products as high-risk and unsuitable for most retail investors.
The ban and the loophole
The FCA permanently banned the mass marketing of speculative illiquid securities, including mini-bonds and loan notes, to ordinary retail investors from 1 January 2021. However, unregulated firms can still try to sell them using exemptions, by asking people to certify themselves as sophisticated, experienced or high-net-worth investors.
The ban was introduced after years of consumer harm, where people lost significant sums in products that were marketed as safe or low-risk. The restriction applies to the promotion of these securities to the general public. But the rules allow certain categories of investor to opt out of the protections, provided they meet specific criteria.
In practice, this means a firm may ask an individual to sign a self-certification form confirming they are a sophisticated or high-net-worth investor. The FCA warns that most people do not meet these criteria, and that ticking the box can strip away key protections. The firm may pressure the consumer to sign quickly, or imply that the certification is a formality. The FCA has said that people should not agree to self-certify unless they genuinely qualify, and that doing so can leave them without recourse if things go wrong.
Why protection is limited
Investors in these products are usually unable to complain to the Financial Ombudsman Service or claim through the Financial Services Compensation Scheme. If the money is invested through an unauthorised firm, it is unlikely to be recovered if the investment fails.
The Financial Ombudsman Service can only consider complaints about firms that are authorised by the FCA. If the firm selling the mini-bond or loan note is not authorised, the ombudsman has no jurisdiction. Similarly, the FSCS only protects consumers when a regulated firm fails, and only for certain types of investment. Unregulated mini-bonds and loan notes fall outside this protection.
This means that an investor who loses money has no automatic route to compensation. They may be able to take legal action against the company, but if the company is insolvent, there may be nothing to recover. The FCA has also noted that some firms use an FCA-authorised security trustee to hold the loan note documents, which can give a false impression of safety. The trustee's role is limited, and it does not provide any guarantee or protection for the investor's money.
How to check before investing
Before parting with any money, check the firm and its permissions on the FCA register. Be wary of high fixed returns, unsolicited approaches, time pressure and requests to self-certify as a sophisticated investor. Do not assume that a reference to an FCA-authorised security trustee makes an offer safe.
The FCA register is a free, publicly available database of all authorised firms and individuals. It shows what activities a firm is permitted to carry out, and whether it is authorised to deal with retail investors. If a firm is not on the register, or is not authorised for the activity being offered, it is likely to be operating illegally.
Warning signs include offers of high fixed returns that are significantly above market rates, unsolicited contact by phone, email or social media, and pressure to make a quick decision. Firms may also ask the consumer to self-certify as a sophisticated or high-net-worth investor, which the FCA says should be treated as a red flag. The regulator advises consumers to be cautious if a firm mentions an FCA-authorised security trustee, as this does not mean the investment is safe or regulated.
Consumers who are unsure about an investment should seek independent financial advice from an FCA-authorised adviser before committing any money. The FCA also encourages people to report any suspicious firms or offers to its consumer helpline, so that it can investigate and warn others.
RELATED GUIDES
DISCLAIMER
This article is for general information only and does not constitute financial or investment advice. It describes an FCA consumer warning; it is not a recommendation about any product or firm. If in doubt, check the FCA register and take regulated advice before investing.
Frequently asked questions
What are mini-bonds and loan notes?
Mini-bonds and loan notes usually involve lending money to a company for a fixed period in return for interest. They are illiquid and speculative, and if the company fails you can lose everything.
Are mini-bonds and loan notes banned?
The FCA permanently banned mass-marketing these speculative securities to ordinary retail investors from 1 January 2021, though unregulated firms can still use exemptions.
Are mini-bonds covered by the FSCS?
Usually not; investors in unregulated loan notes and mini-bonds are typically unable to claim through the Financial Services Compensation Scheme or complain to the Financial Ombudsman Service.
How can I check if an investment is safe?
Check the firm and its permissions on the FCA register, and be wary of high fixed returns, unsolicited offers, time pressure and requests to self-certify as a sophisticated investor.
What is a sophisticated or high-net-worth investor certification?
A self-certification some firms ask you to tick to use an exemption; most people do not meet the criteria, and agreeing can remove important protections.
SOURCES
- FCA: consumers warned to beware of risky mini-bonds and loan notes – accessed 2026-08-21
- FCA: unregulated loan notes and mini-bonds statement – accessed 2026-08-21
- FSCS: investment protection – accessed 2026-08-21
- Financial Ombudsman Service – accessed 2026-08-21
