Administrators of London Capital & Finance still have no access to call recordings database

Maria Nikolova

The joint administrators are however taking steps for delivery up to them of call recordings.

The latest Bondholder Communication published by the Joint Administrators of collapsed London Capital & Finance (LCF) does not provide much hope in terms of progress of investigative work.

The Joint Administrators of Smith & Williamson LLP says they have received a number of communications from Bondholders recently, requesting recordings of their calls with LCF or Surge employees, in relation to their investments.

It should be noted that:

  • The joint administrators do not yet have access to the call recordings database;
  • The joint administrators are however taking steps for delivery up to them of call recordings;
  • The administrators understand that in parallel the FSCS are taking steps to secure call recordings;
  • The telephone recordings are not comprehensive. For example, the joint administrators are aware that a number of calls were made from mobile phones and accordingly there will not be records of these calls held by the third party provider which maintains the call recordings database;
  • The joint administrators understand that the current third party provider only holds call recordings made/received during the last year prior to the FCA intervention in December 2018.

The first progress report, detailing the first six months of the administration, is set to be delivered August 29, 2019.

Let’s note that, FSCS’s investigation identified evidence of regulated activity where the Scheme believes LCF has liability. Following a review of call recordings and emails to investors, FSCS believe that Surge Financial Ltd (“Surge”), acting on behalf of LCF, provided a number of LCF clients with misleading advice, in both telephone calls and emails.

FSCS’s review identified a number of cases where Surge went beyond providing information to investors and made comments and value judgements that involved a significant element of evaluation and/or persuasion, i.e. they gave advice. Although the definition of advising has been narrowed for Part 4A permission purposes from 3 January 2018, the scope of FSCS protection was not affected and the Scheme is still able to protect advice without a personal recommendation. There was also misrepresentation of the security/risk of the mini-bonds and their ISA status.

Although Surge is not itself regulated, because it was acting on behalf of LCF and under its control, the Scheme is satisfied that LCF has liability for the advising carried out by Surge. Surge was not an appointed representative, but FSCS is satisfied that LCF is liable for Surge in this regard, as Surge was its agent acting with actual or ostensible authority and LCF is vicariously liable for Surge’s actions. LCF had few employees/staff, and all direct contacts with investors were via Surge, which is understood to have had approximately 40 staff who worked exclusively for LCF. Surge always held itself out as LCF when communicating with investors, e.g. by telephone and email. Sales were routed through Surge to LCF, such that investors would not have known that they were not dealing with LCF.

Only advising that happened after LCF became fully authorised on June 7, 2016 can be protected. FSCS understands that approximately 95% of current bondholders invested after this date. Further, in order to pay compensation, FSCS will have to be satisfied that a particular claimant received advice, relied on this when investing, and suffered financial loss as a result. Claims will also have to meet the usual requirements under FSCS’s COMP rules, e.g. as to eligibility.

The Scheme is in the process of designing its claims process in this regard and may obtain access to further investor communications from LCF’s administrators.

Read this next

Digital Assets

Bybit exits UK market ahead of regulatory changes

Bybit is suspending its cryptocurrency services for users in the United Kingdom due to impending regulations from the country’s Financial Conduct Authority (FCA).

Digital Assets

Binance argues SEC trampled authority set by Congress

Binance, Binance.US, and Changpeng Zhao have jointly filed to dismiss a lawsuit brought by the Securities and Exchange Commission (SEC) in June.

Uncategorized

Oscar Asly replaces Rasha Gad as CEO of M4Markets Dubai

Seychelles-regulated brokerage firm M4Markets has secured a license from the Dubai Financial Services Authority (DFSA) after it has already incorporated its new subsidiary in the Dubai International Financial Center (DIFC).

Retail FX

Capital Index UK reports mitigated loss despite revenue drop

FCA-regulated brokerage firm Capital Index (UK) Limited has released its annual financial report for the year 2022.

Digital Assets

Mike Novogratz’s Galaxy Digital expands in Europe

Galaxy Digital, the New York-based cryptocurrency financial services company founded by Mike Novogratz, is expanding its presence in Europe by appointing Leon Marshall as its first European CEO.

Metaverse Gaming NFT

Turingum Partners with MarketAcross to Drive Web3 Adoption in Global and Japanese Markets

Global blockchain PR leader MarketAcross joins forces with Japanese Web3 specialist Turingum to mutually expand its market reach, aiming to fortify Turingum’s worldwide footprint and MarketAcross’s presence in the lucrative Japanese blockchain landscape.

Digital Assets

Binance to delist all stablecoins in Europe next year

During a public hearing with the European Banking Authority (EBA), an executive from Binance said that the exchange could ultimately delist stablecoins from its European platforms by June 30, 2024.

Industry News

“Unconscionable conduct”: ASIC fines National Australia Bank $2.1m for overcharging customers

NAB faces a $2.1 million penalty for unconscionable conduct, as the Federal Court rules the bank knowingly overcharged customers, and took over two years to rectify the situation.

<