The UK's Financial Conduct Authority has decreed that London Capital & Finance plc must cease conducting all regulatable activity as an investigation into its marketing practices unfolds.

Last month, the regulatory body told the mini-bond firm to withdraw all of its existing marketing materials in relation to LCF’s fixed-rate ISA or bond. It is now prohibited from handling any money in its bank accounts as well.

Mini-bonds are not regulated by the FCA directly and people who sustain losses from them are therefore not reimbursed by the UK's Financial Services Compensation Scheme. The action that the regulator has taken is most unusual and presumably centres around the bonds' highly risky nature, which might explain why the top-performing bond that London Capital offered yielded 8% per annum. Some individual savings accounts (ISAs) that London Capital marketed were mini-bonds and this is not usually the case with ISAs, hence the FCA's worry that the firm's marketing might not have made this obvious.

London Capital sold the bonds to HNW and other individual investors and then invested the proceeds in small businesses on their behalf. It has reportedly said that it has always paid everyone their 8% and that it has insisted on the companies in which it invests putting up assets as surety in case of a default. This, however, seems not to have reassured the FCA.