In the first use of new consumer protection powers, the watchdog has temporarily restricted firms from selling CoCos to professional, institutional and high net worth retail investors from October 2014 to 2015.
CoCos are highly complex and hence are deemed inappropriate for the mass retail market by FCA, even though the UK market is still at an early stage of development.
FCA policy, risk and research director Christopher Woolard said: "In a low interest rate environment many investors might be tempted by CoCos offering high headline returns.
"However, they are complex and can be highly risky, and the FCA has used its new powers to ensure that CoCos are not inappropriately made available to the mass retail market while still allowing access for experienced investors."
The value of CoCos can be written down or converted into equity if the issuer’s capital drops, and investors find it difficult to assess, understand and their prices as issuers can have unusually broad discretion in relation to coupon payments.
During ban, FCA would continue to work with issuers to ensure that the CoCos sale is appropriately targeted, and is scheduled to announce permanent rules in late 2014.
The European Securities and Markets Authority and Joint Committee of European Supervisory Authorities have already highlighted the risks of CoCos and firms responsibilities during their distribution.
