Investing in Restricted Mass Market Investments

Estimated reading time: 2 min.

Don't invest unless you're prepared to lose all the money you invest. This is a high risk investment and you are unlikely to be protected if something goes wrong.

Due to the potential for losses, the Financial Conduct Authority considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start up businesses fail.

2. You are unlikely to be protected if something goes wrong

Protection from the Financial Services Compensation Scheme, in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker at https://www.fscs.org.uk/check/investment-protection-checker/

Protection from the Financial Ombudsman Service does not cover poor investment performance. If you have a complaint against an FCA regulated firm, the Financial Ombudsman Service may be able to consider it. Learn more at https://www.financial-ombudsman.org.uk/consumers

3. You won't get your money back quickly

Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.

The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.

If you are investing in a start up business, you should not expect to get your money back through dividends. Start up businesses rarely pay these.

4. 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. Learn more at https://www.fca.org.uk/investsmart/5-questions-ask-you-invest

5. The value of your investment can be reduced

The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start up businesses issue multiple rounds of shares.

These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

If you are interested in learning more about how to protect yourself, visit the FCA's website at https://www.fca.org.uk/investsmart

If you have any questions about this risk summary, please contact info@chrystalcapital.com