Risk summary for non-readily realisable securities which are shares
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) 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.
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 business.
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. There is no guarantee that you will be able to sell your investment early.
A history of dividend payments is no guarantee of future dividend payments.
One 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.
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.
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 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 here.