Regulation of non-transferable debt securities (mini-bonds): a consultation
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This is the government’s response to the consultation on the regulation of non-transferable debt securities (NTDS) which ran from 19 April 2021 to 21 July 2021. This document summarises stakeholder responses to the consultation and explains the government’s preferred approach after considering those views.
While the majority of responses to the consultation agreed that NTDS should be brought into regulation, a number of responses asked for a joined-up approach that treats non-transferable debt securities consistently with other types of securities. The government therefore intends to include NTDS (and non-transferable securities more generally) within the scope of the new public offerings regime that is being developed as part of the Prospectus Regime Review. This will ensure a joined up approach is taken to the regulation of securities and fulfil Dame Elizabeth Gloster’s recommendation to bring non-transferable securities into the scope of regulation.
Original consultation
Consultation description
London Capital & Finance (LCF) which issued non-transferable debt securities (NTDS), entered administration in January 2019, impacting 11,000 investors who had invested more than £230m. Issuing NTDS is currently an unregulated activity and investors therefore benefitted from few regulatory protections when investing in the products.
Following the failure of LCF, the Treasury announced it would review the regulatory arrangements in place for the issuance of NTDS to retail investors. An independent investigation into the Financial Conduct Authority’s supervision of LCF carried out by Dame Elizabeth Gloster which was published in December 2020 also made a specific recommendation that the government should consider bringing the issuance of NTDS into regulation.
This consultation is the culmination of the Treasury’s review and explains that the activity carried out by LCF, and other similar NTDS issuers, had the characteristics of a financial services activity, and sets out proposals for how the issuance of these securities could become regulated. The preparation of the consultation has been supported by a detailed study of the NTDS market, carried out by London Economics and YouGov.
Documents
Last updated 1 March 2022 + show all updates
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consultation response added
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First published.