FAI Money, a finance company owned by Eric Watson and Mark Hotchin and once part of the Hanover Group, has told investors it will repay them early and will no longer take deposits as of March 22.

A letter to debenture holders says: "The board of FAI have decided they no longer wish to continue funding the business by the way of securing investments through the retail markets under the current prospectus and investment statement."

It advises that they will repay the investments received to date with accrued interest. No reason is given for the decision.

On Saturday, Herald columnist Brian Gaynor criticised FAI for continuing to take funds from retail investors. He argued that the FAI prospectus and investment statement were inadequate for the purpose of raising money from the public.

FAI - which is covered by the Government's deposit guarantee scheme- had previously registered for a ratings exemption with the Reserve Bank enabling it to continue to take deposits from retail investors.

The letter notes that the early repayment is permitted as per a clause of the Trust Deed. As of last night the FAI website was still advertising returns of as much as 8.85 per cent per annum for a five-year investment of more than $5000.

Hotchin and Watson were the founders of the much larger Hanover Finance, which was the major shareholder of FAI.

Hanover froze funds of more than 16,000 investors worth more than $500 million in 2008.

In March last year Hanover Finance agreed to sell its interest in the company to interests associated with Watson and Hotchin.

In December Hanover investors agreed to the sale of the most of the company's loan book to Allied Farmers.