LONDON (Reuters) - Britain's finance ministry said on Monday it would look at whether the regulation regime around mini-bond investments, used to raise funds for small businesses, is up to scratch following the collapse of investment firm London Capital & Finance (LCF).
LCF went into administration in January with losses of up to 237 million pounds ($301 million) from mini-bond investments.
While LCF itself was regulated by the Financial Conduct Authority (FCA) watchdog, mini-bonds are not regulated.
"The Treasury will consider whether the current regulatory regime for these securities issued by companies to consumers is appropriate," junior finance minister John Glen said in a letter to lawmakers published on Monday.
Last month the finance ministry ordered the FCA to conduct an investigation into the collapse of LCF and said it would conduct its own review into the market for mini-bonds, which are a type of non-transferable debt security.
Scrutiny over the inner workings of the watchdog comes at a sensitive time for FCA Chief Executive Andrew Bailey, who is seen as the most likely successor to Mark Carney as Bank of England governor from early 2020.
The finance ministry's review will look at the promotion of mini-bonds and consumer protection, Glen said.
Smith & Williamson, the appointed administrator for LCF, has said that 11,500 bondholders are unlikely to get more than 20 percent of their investment back.
In addition to the FCA's investigation into the collapse of LCF and the finance ministry's review into regulation, there is also a Serious Fraud Office investigation into individuals associated with LCF.