Winterflood Securities, one of the UK’s leading liquidity providers, supports Lord Moylan’s calls for greater debt market democratisation during the second reading of the Compensation (London & Capital Finance plc and Fraud Compensation Fund) Bill.

Speaking yesterday in the House of Lords, Lord Moylan said it was a ‘regrettable but necessary’ bill and strongly advocated for the levelling-up of access for retail investors.

Thousands of savers put their savings into high-risk mini-bond products following extensive advertising, particularly on social media. Around 11,500 bondholders put £237 million into London Capital & Finance (LFC) after being promised returns of 6.5% to 8%, only for the company to fall into administration.

Lord Moylan highlighted that it was not surprising some ordinary investors were being pushed towards unregulated mini-bonds, when retail investors have been restricted from premium rated regulated corporate bonds due to the unintended consequences of regulation, particularly the EU’s Prospectus Directive that has favoured institutional investors.

He drew on his previous experiences working in the bond markets, where he said most issuances could be accessed for a minimum investment around £1,000 and this allowed the private investor to become ‘the backbone’ of the UK’s bond market. However, he said a process of 'de-democratisation' over the last 10-15 years had cut out the retail investor and now needed to be addressed. He stressed that this area should be on the government’s agenda to ensure ordinary investors were given an opportunity to avoid such products as the LCF mini-bonds.

Commenting on Lord Moylan’s speech in the House of Lords, Stacey Parsons, Head of Fixed Income and Sales Trading, Winterflood Securities.

“Winterflood strongly supports Lord Moylan’s comments in advocating for greater retail access to regulated markets”

“Locking out retail from regulated transferable debt markets, at a time when investors are struggling for yield and returns, has had unintended, and sometimes catastrophic consequences for investors”

“The UK has a love affair with equities, it is now time to champion the retail investor by giving them easy and transparent access to regulated premium grade debt markets – unlocking the potential for the investor to access single stock debt markets in the same way they can access single stock equity markets and create diversified streams of funding for premium grade regulated Issuers.”

“If retail investors can readily invest directly in an increasingly wide range of niche and esoteric asset classes, then why not a regulated premium grade UK bond issuer. Improving access will be a challenge for issuers, brokers, market makers, exchanges, and regulators, but by acting collaboratively, we can improve outcomes for retail investors," Parsons said.

As HM Treasury appoint Mark Austin as an Independent Chair of the UK Secondary Capital Raising Review, focusing on reviewing the inclusion of retail investors into equity fundraising, Winterflood and other city experts look forward to a similar focus on the balanced ownership of debt within the retail investor community, an area that Winterflood has been collaboratively highlighting within the industry since the mini bond scandal first came to light.

Here is a link to Lord Moylan’s Speech in the House of Lords. 19/10/21