Clarke Willmott partner, Laura Robinson, who is a dual-qualified solicitor and financial adviser (non-practising), has successfully acted for dozens of individuals who invested in a various, different bonds and suffered losses as a result.
There’s a common misconception that ‘bonds’ are inherently low risk. When they’re marketed with interest rates of 10% or more, it’s easy to see why they appear so attractive to many. However, bonds come in many forms; gilts, corporate bonds (loan notes), and investment bonds – some of which have a long history of being mis-sold.
Whilst all investments carry risk, the risk is far greater when there is no regulatory oversight, a lack of transparency and limited recourse should things go wrong. Because bonds vary so widely, it is crucial to understand exactly what type of bond is being offered and what the underlying investment involves.
FCA warning to investors
The UK’s Financial Conduct Authority (“FCA”) recently issued a sharp warning to potential investors: be cautious when enticed by high-return opportunities. The FCA highlighted unlisted loan notes and mini-bonds in particular, both of which have been responsible for major investor losses in recent years.
Clarke Willmott’s specialist financial services litigation team, formed 25 years ago, is currently seeking compensation for numerous investors, with the team having already recovered over £50m for its clients in recent years.
In this article, Laura focuses on loan notes and mini bonds – the risks they pose and why so many clients have been drawn into these unregulated investments unwittingly.
Loan notes and mini-bonds explained
Whilst gilts are effectively loans to the UK Government, with a solid history of paying out at minimal risk, loan notes and mini-bonds are very different. These products involve an investor lending money to a company (often involved in property development) at a certain rate for a specified period of time, after which the capital is due to be repaid with interest. They are typically high risk, unregulated and have caused multi-million pound losses for investors.
The FCA’s recent warning followed the collapse of the property developer Godwin Group. Godwin entered into administration in June 2025 leaving thousands of investors with the prospect that they will lose all of their money. The investors had purchased loan notes, estimated at around £165m in total. The loan notes promised high returns of 10-12%, but haven’t paid out.
But Godwin wasn’t a first. Dolphin Capital (later renamed Dolphin Trust, then German Property Group), another property developer, took over €1bn from around 25,000 investors worldwide who were left high and dry when it entered into administration in 2020.
Before Godwin, London Capital & Finance (LCF) issued nearly 12,000 mini-bonds taking around £237m from UK investors, before going into administration in 2019 and failing to pay out.
The Dolphin, LCF and Godwin bond issues have all been labelled as fraudulent and/or ‘ponzi’ schemes – an arrangement where existing investors are paid from the money raised newer investors. However, it seems that most, perhaps all, investors lost everything. The stories we hear from affected families are truly heartbreaking.
But how does this happen? Sometimes, investors are “reassured” by glossy brochures, presentations and false promises that the returns are guaranteed. They may also be told that if the loan notes can’t be paid out for some reason at the point they become due, the investor will be given shares in the company instead. Whilst these shares might be portrayed as valuable, they often turn out to be worthless.
Many of the investment products causing concern do not require FCA authorisation. This allows unregulated firms to sell loan notes and mini-bonds without oversight, removing vital protections. If an investment firm is unregulated, investors cannot make complaints to the Financial Ombudsman Service (“FOS”) or claim compensation through the Financial Services Compensation Scheme (“FSCS”) should the investments cause loss.
Rising cases of fraudulent investment schemes
Our commercial litigation team has also seen a rise in investors being enticed into investment schemes fraudulently. This can occur where for individuals or organisations deceive investors to obtain money through false representation or misleading information. Examples can include taking deposits for property developments which never materialise or fake/high yield investment programmes.
The recent cases that we have dealt with have involved property investment and typically promise high, low-risk or “guaranteed” returns, often far exceeding market norms and which doesn’t materialise.
Investors are exploited due to their trust in these schemes or people.
A detailed analysis of these cases involves reviewing the contractual documentation and communication, identifying potential breaches of that contract and determining the cause of action including civil fraud, misrepresentation or similar.
Fraud cases are heavily evidence-based and it is important to preserve documentation and communication at the outset. Cases are sometimes legally complex, financially urgent as well as emotionally challenging. Seeking professional advice early on can improve the chances of a successful recovery and making those accountable.
Certification as a ‘sophisticated or high net worth investor”
Laura also warns that investors should be cautious when asked to certify themselves as sophisticated (i.e. experienced) or high net worth investors. This certification gives the green light for high-risk products to be sold to the investor, which would otherwise be restricted. In its warning, the FCA urged potential investors to think carefully about whether they genuinely have experience of similar high-risk investments before agreeing to any certification. They should also be comfortable that they can withstand the potential losses.
It isn’t the case that bonds are only mis-sold by unregulated firms. Clarke Willmott’s financial mis-selling solicitors are acting in cases where, for example, multiple regulated firms are involved in the mis-selling process, including financial advisers and pension providers which facilitated and accepted high risk, unsuitable loan notes.
What to do if you have lost money
Our specialist litigation lawyers at Clarke Willmott specialise in advising clients who have suffered losses as a result of investing money, whether in bonds, tax mitigation vehicles, trading platforms or pensions.
There can be multiple parties involved in any claim or complaint, and strict time limits within to make them, so it is important to take legal advice without delay.
We would be pleased to offer a free, no-obligation initial consultation to discuss your particular situation and the options available to you. To speak with a member of our team, please request a consultation.
Note: Nothing in this article is, or should be treated as, financial advice.
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