LONDON (Reuters) – Britain’s finance ministry stated on Monday it might take a look at whether or not the regulation regime round mini-bond investments, used to boost funds for small companies, is as much as scratch following the collapse of funding agency London Capital & Finance (LCF).
LCF went into administration in January with losses of as much as 237 million kilos ($301 million) from mini-bond investments.
While LCF itself was regulated by the Financial Conduct Authority (FCA) watchdog, mini-bonds are usually not regulated.
“The Treasury will consider whether the current regulatory regime for these securities issued by companies to consumers is appropriate,” junior finance minister John Glen stated in a letter to lawmakers revealed on Monday.
Last month the finance ministry ordered the FCA to conduct an investigation into the collapse of LCF and stated it will conduct its personal assessment into the marketplace for mini-bonds, that are a kind of non-transferable debt safety.
Scrutiny over the internal workings of the watchdog comes at a delicate time for FCA Chief Executive Andrew Bailey, who’s seen because the almost certainly successor to Mark Carney as Bank of England governor from early 2020.
The finance ministry’s evaluation will take a look at the promotion of mini-bonds and shopper safety, Glen stated.
Smith & Williamson, the appointed administrator for LCF, has stated that 11,500 bondholders are unlikely to get greater than 20 % of their funding again.
In addition to the FCA’s investigation into the collapse of LCF and the finance ministry’s assessment into regulation, there’s additionally a Serious Fraud Office investigation into people related to LCF.
Reporting by Andy Bruce; Editing by Alison Williams