Very few LCF bond investors to be compensated, FCA now says

Very few LCF bond investors to be compensated, FCA now says

  • It has emerged that of the 11,600 mini-bond investors that invested in the inoperative bondholder London Capital & Finance (LCF), only 159 would be compensated.
  • The company went under having recorded losses amounting to 237 million pounds.
  • The compensation authority said it was also unable to shield another 283 bondholders that transacted with the defunct firm before its registration and certification in June 2016.

It is now official that of the 11,600 investors that invested in the inoperative bondholder London Capital & Finance (LCF), only 159 would be compensated. The Investment firm was permanently closed after it was involved in one of the kingdom’s largest savings scandal after the 1988 Barlow-Clowes collapse.

It has now been a year since LCF was liquidated and administrators appointed to oversee compensation and winding up.

The company went under having recorded losses amounting to 237 million pounds. LCF’s dejection escalated when the UK’s Financial Conduct Authority (FCA) directed it to pull down promotional material for “mini-bonds”.

Today, The Financial Services Compensation Scheme (FSCS) reported that it could only assist a mere 159 investors in getting their money back, leaving thousands of others counting millions in losses.

The investors to be compensated are those that switched from shares and stocks to LCF’s unregistered bonds.

In an issued statement, FSCS said: “While FSCS maintains that the act of issuing mini-bonds is not a regulated activity, and is therefore not something FSCS protects, FSCS has concluded there will be some customers who were given misleading advice by LCF and have valid claims for compensation as a result. However, FSCS expects that many customers will not be eligible for compensation on this basis.”

The compensation authority said it was also unable to shield another 283 bondholders that transacted with the defunct firm before its registration and certification in June 2016.

According to the FSCS, in this particular case, the fact that some investors were given incorrect information about LCF bonds does not qualify as misleading advice.

“For that reason, and based on its investigations so far, FSCS believes many LCF customers are unlikely to be eligible for compensation based on misleading advice,” the authority stated.

LCF issued 16,700 bonds and an investigation into the FCA’s handling of the company has kicked off.

“I appreciate that the initial decisions and outlook we are announcing today are likely to be disappointing to many LCF customers.

We are, however, working as quickly as we can to establish a suitable process for determining customers’ claims, and expect to be in a position to start this process in the next few weeks,” Caroline Rainbird, the CEO of FSCS said.

The Serious Fraud Office of the UK has also commenced an independent investigation into the matter.

By Damian Wood
As an experienced trader, I work for myself managing my own small portfolio and also contributing on several investment news sites. I mix my passion for the industry and journalism to bring my readers informative and trustworthy articles.

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