The FCA is warning consumers about the risks of investing in loan notes and mini-bonds issued by unregulated companies, after continuing to see people lose money in these high-risk investments.
The recent failure of Woodville Consultants Ltd, a litigation funder that raised capital from retail investors through unregulated loan notes, shows the potential risk to investors.
A loan note or mini-bond usually involves lending money to a company for a set period in return for interest. If that company fails, consumers could lose every penny.
The FCA permanently banned the marketing of speculative illiquid securities, including mini-bonds and loan notes, to retail investors from 1 January 2021.
But consumers may still come across adverts for loan notes and mini-bonds in everyday places, including social media, online adverts or websites promoting high fixed returns.
The adverts can look simple and safe, but warning signs include pressure to act quickly, unclear explanations of how money could be lost, or claims that an investment is 'asset-backed' without clear evidence of what stands behind it.
Examples of the practices the FCA sees include:
- Unregulated introducer firms passing consumers on to unregulated companies offering high-risk investments often taking a large fee, or commission, so reducing their initial investment.
- Consumers encouraged to certify themselves as experienced or wealthy investors to enable investments to be promoted to them.
- Firms promoting high-risk investments without the permission they need.
- Unclear fees or hidden conflicts, where those selling the investment may benefit from consumers investing.
- Scammers seeking to add ‘halo’ associations to infer legitimacy; whether that be listing on overseas exchanges, or highlighting an FCA regulated firm being involved in the wider administration.
- Using trust structures or other arrangements to try to stay outside FCA rules.
Lucy Castledine, director of consumer investments at the FCA, said:
'Big, fixed returns are a warning sign, not a guarantee. Loan notes, mini-bonds and other speculative illiquid securities are high-risk investments and are not suitable for most people.
'Ordinary retail investors should only invest through regulated firms because if they invest through an unauthorised firm, they may have little or no protection if things go wrong. We are working hard to prevent harm, but consumers should still stop and check before investing.'
The FCA encourages anyone involved in distributing or funding high-risk investments to report anything suspicious. This includes regulated firms, banks, payment firms, lawyers, accountants and auditors who may be involved in getting these investments to consumers.
The FCA has issued more than 1,200 warnings so far this year, told firms to stop unlawful promotions and referred cases to other law enforcement agencies where further action may be needed.
But scams can be complex, fast-moving and hard to stop, especially when run from overseas or designed to avoid regulation.
To address the harm, regulated firms like banks and payment providers, regulators, government and law enforcement need to continue to work together.
Consumers need to be alert to the risk of harm and protect themselves using the tools available, like the FCA Firm Checker.
Consumers can help too by reporting any concerns to the FCA if they see a suspicious investment or think they’ve been contacted by a fraudster or unauthorised firm.
Notes to editors
- In its Perimeter Report, the FCA has called on the government to review the legislative exemptions that can mean certain high risk investments can be promoted outside FCA regulation.
- Investors in mini-bonds or loan notes are unlikely to be able to refer their complaints to the Financial Ombudsman Service or claim for losses through the Financial Services Compensation Scheme if things go wrong, unless they dealt with an authorised person and the complaint relates to a regulated activity.
- Since January 2026, a new regime regulating offers of securities to the public came into force. Read more information about what this regime means for consumers and what they should look out for.
- Robert Goodhew and Andrew Stoneman of Kroll Advisory were appointed as joint administrators of Woodville Consultants Limited on 16 July 2026. Enquiries should be made via [email protected].
Facts Only
* The FCA is warning consumers about risks in investing in loan notes and mini-bonds from unregulated companies.
* Woodville Consultants Ltd, a litigation funder, raised capital via unregulated loan notes.
* A loan note involves lending money for interest; company failure can result in loss of investment.
* The FCA permanently banned the marketing of speculative illiquid securities, including mini-bonds and loan notes, to retail investors from January 1, 2021.
* Advertisements for these investments may appear safe but include warning signs like pressure to act quickly or unclear loss explanations.
* Observed practices include unregulated firms taking large fees, encouraging self-certification of investor status, and promoting investments without permission.
* Scammers use 'halo' associations, such as listing on overseas exchanges or mentioning regulated firms, to imply legitimacy.
* Lucy Castledine stated that big, fixed returns are a warning sign, not a guarantee for high-risk investments.
* The FCA advises retail investors to only invest through regulated firms.
Executive Summary
Full Take
The narrative demonstrates a significant gap between regulatory action and consumer exposure regarding complex, high-risk financial products. The pattern involves the proliferation of high-yield, illiquid securities marketed via unregulated channels, exploiting the inherent information asymmetry between sophisticated entities and retail investors. The reliance on opaque mechanisms—such as using trust structures or relying on external associations to mask risk—suggests an intent to operate outside established protective frameworks. The warning against 'big, fixed returns' directly addresses a core cognitive trap: equating high potential reward with low risk. The system relies on the hope that consumers will either lack the knowledge to verify claims or be overwhelmed by marketing tactics designed for urgency.
The implication here is a systemic failure in transparency where regulatory bans do not immediately halt the pervasive advertising mechanisms. This creates an environment where harm is facilitated through complex structuring and the exploitation of trust, rather than simple illegality. The focus on reporting and collaboration among various bodies suggests that stopping this dynamic requires strengthening the inter-agency response to complex, transnational schemes designed to evade oversight.
What assumptions are underpinning the call for vigilance? Does the ease with which scams can be run from overseas inherently negate the protective function of domestic regulation? What mechanisms must exist to ensure that regulatory bans translate into tangible cessation of misleading promotional activities across all digital spaces?
Sentinel — Human
This text reads as a structured journalistic report synthesizing regulatory warnings and specific examples regarding high-risk investments, indicating human editorial oversight.