Despite the censure it has decided not to impose any financial penalty on the firm.

The regulator said it does not consider it appropriate to impose a financial penalty on the firm as it is insolvent and in administration.

It added that to fine the firm would, “only divert funds that the administrators may use for the benefit of bondholder creditors.”

Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “LCF’s use of financial promotion led to bondholders, many of whom were vulnerable, investing in unsuitable, high-risk products.

“We recognise our censure will not provide solace to those investors who lost out. But it is important we set out what went wrong at LCF and how their promotions misled people into parting with their money.”

The mini-bond provider collapsed in 2019 leaving 11,000 investors with combined losses of over £237m.

Financial promotions were used by LCF to market mini-bonds to retail investors. These promotions presented a misleading picture of the mini-bonds and made them appear a far more attractive investment than they were, the FCA said.

Investors were not told about the true nature of the mini-bonds, including the presence of hidden charges and the high-risk and unsustainable nature of the lending being carried out by LCF to underpin the mini-bonds.

The FCA found that LCF used bondholders' money to fund seemingly independent comparison websites to showcase its mini-bonds next to safer investments, which had a lower rate of return. This had the effect of enticing retail investors into investing in LCF’s high-risk products.

LCF also advertised the mini-bonds as ISA compatible when this was not the case.

The Serious Fraud Office is currently investigating whether those responsible for running LCF may have been involved in knowingly defrauding bondholders and been the cause of much of the losses.

It has already secured a suspended 10 month prison sentence against Michael Thomson, the former CEO of LCF. 

The sentence, suspended for two years, was imposed at Southwark Crown Court because Mr Thomson was found to have breached a restraint order on use of his bank accounts.

The SFO found that that Mr Thomson had hidden £95,000 he received after the restraint order was imposed. The sum included £55,000 from a tax rebate and a fraudulent insurance claim worth £40,000 for repair work to a barn that was never completed. The money was paid into an account owned by Mr Thomson’s wife in an attempt to hide the money from the SFO, the SFO said.

SFO investigators found that Mr Thomson spent some of the money to further "conceal and hamper" its recovery: spending £5,000 on a holiday in Italy, buying a £3,900 horse saddle, spending £1,170 on a hotel and spa stay in Torquay and paying £5,495 for a hot tub.