The Financial Conduct Authority (FCA) has issued a national warning to consumers about the risks of investing in loan notes and mini-bonds after the collapse of the multi-million pound Merseyside firm 79th Group. The warning follows the controversial administration of the Southport-based company, which sold unregulated high-return loan notes to people across the world.
The 79th Group plunged into administration last year, leaving dozens out of work and thousands worried about their investments. It is believed thousands of people invested around £250m in the company, which had offices in Europe, Africa and Asia. A City of London Police fraud investigation at the beginning of 2025 resulted in the arrest of four individuals, prompting the collapse of the network of 79th Group companies.
FCA warning on high-risk investments
The FCA said it has "continuing to see people lose money in these high-risk investments". A loan note is a financial agreement between a borrower and a lender that states the terms of a loan. It is a type of debt security often used to raise capital for businesses.
The warning also comes after the failure of Woodville Consultants Ltd, a litigation funder that raised capital through unregulated loan notes, similar to the practice of the 79th Group.
Warning signs for investors
The FCA banned the marketing of speculative illiquid securities, including loan notes and mini-bonds, to retail investors in January 2021, but consumers are still coming across adverts for loan notes on social media, in online adverts and on websites offering high fixed returns.
The FCA warned that despite these adverts looking safe, there are warning signs which include pressure to act quickly, unclear explanations of how money could be lost, or claims the investment is asset-backed without clear evidence. The watchdog stated examples of these practices 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
FCA director's advice
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."
In a statement earlier this year, the FCA said: "The City of London Police, as the National Lead Force for fraud, agreed to investigate in September 2024 after we shared our concerns about the 79th Group with law enforcement agencies. We are continuing to support this police investigation.
"We urge anyone who invested with the 79th Group to report to the City of London Police via the Major Incident Public Portal for Operation Mold and to contact their bank or payment service provider to understand their situation and possible redress options.
"We recently warned people about the risks of investing in unregulated unlisted loan notes or mini-bonds, which are generally only suitable for experienced investors who feel confident in assessing the quality of the company's business and the likelihood of being repaid. Many of the firms offering these types of investment don't need to be authorised by the FCA, as they rely on exemptions in the law that take them out of our remit. If a firm offering an investment is not regulated by the FCA there are generally far fewer protections."
