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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be very complex and high risk.

What are the key risks?

1. You could lose all the money you invest
   • If the business offering this investment fails, there is a high risk that you will lose all your money. Businesses like this often fail as they usually use risky investment strategies.
   • Advertised rates of return aren’t guaranteed. This is not a savings account. If the issuer doesn’t pay you back as agreed, you could earn less money than expected or nothing at all. A higher advertised rate of return means a higher risk of losing your money. If it looks too good to be true, it probably is.
   • These investments are sometimes held in an Innovative Finance ISA (IFISA). While any potential gains from your investment will be tax free, you can still lose all your money. An IFISA does not reduce the risk of the investment or protect you from losses.
2. You are unlikely to be protected if something goes wrong
   • The business offering this investment is not regulated by the FCA. Protection from the Financial Services Compensation Scheme (FSCS) only considers claims against failed regulated firms. Learn more about FSCS protection here.
   • The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm. Learn more about FOS here.
3. You are unlikely to get your money back quickly
   • This type of business could face cash-flow problems that delay interest payments. It could also fail altogether and be unable to repay investors their money.
   • You are unlikely to be able to cash in your investment early by selling it. You are usually locked in until the business has paid you back over the period agreed. In the rare circumstances where it is possible to sell your investment in a ‘secondary market’, you may not find a buyer at the price you are willing to sell.
4. This is a complex investment
   • This investment has a complex structure based on other risky investments. A business that raises money like this lends it to, or invests in, other businesses or property. This makes it difficult for the investor to know where their money is going.
   • This makes it difficult to predict how risky the investment is, but it will most likely be high.
   • You may wish to get financial advice before deciding to invest.
5. Don’t put all your eggs in one basket
   • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
   • A good rule of thumb is not to invest more than 10% of your money in high-risk investments.