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City watchdog failing to protect consumers from high-risk investment firms

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Another day another investment scheme collapse.

This time it is mini-bond firm Asset Life. News broke today that the company had crashed into administration last month owing more than 500 investors £8m.

Asset Life had close links with fellow mini-bond firm London Capital & Finance (LCF), which went bust in December owing 11,600 investors £236m.

While LCF may grab headlines, it is only the most prominent of a string of investment firms to have gone bust in recent months, leaving investors millions of pounds out of pocket.

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In March, bond investment firm MJS Capital which raised up to £30m from investors went into administration; in May property investment firms Harewood Associates and Mederco both went to the wall owing investors and creditors £32m and £27m respectively; and in June foreign exchange investment firm Hudspiths shut up shop owing clients £40m.

Read more: London Capital & Finance investors rage against the FCA

Although the FCA belatedly intervened in LCF and the Serious Fraud Office is now investigating after the fact, investors in smaller schemes seem hard-pressed to get regulators (or in cases where there is evidence of fraud – the police) interested.

In the case of LCF, the firm was regulated by the FCA but its mini-bond business was entirely unregulated – leaving creditors with no protection when it collapsed.

In April, the Treasury Committee said the FCA should be given powers to recommend changes to its regulatory perimeter, in order to crack down on firms exploiting the grey area between regulated and unregulated activity, while FCA chair Andrew Bailey told its annual meeting in July that he was frustrated at the lack of support from internet service providers in cracking down on the advertising of high-risk investment schemes online.

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