British MP under fire for dodgy salary from London Capital & Finance
British politician allegedly has taken his salary from the proceeds of failed electronic trading firm whose customer losses are not covered by the FSCS
Perhaps rather unjustly, the retail FX business has been the subject of some regulatory drubbing over the past few years, especially in Europe, where the European Securities and Markets Authority (ESMA) has systematically singled out retail margin trading companies for draconian changes to the way in which products, particularly CFDs which are popular in Britain, are marketed and distributed.
This may well be about to come to a welcome end due to the FCA’s perspective that a much more pragmatic and business friendly regulatory structure is likely to emerge in Britain once Brexit is completed, however it is the same incumbent government that now has to deal with a PR disaster of its very own.
Indeed, the Conservative government is very much a supporter of the electronic trading industry and London’s world leading financial markets structure, including having a technology division headed by astute MP Adam Afriyie who is well regarded in technological and financial circles as an ambassador for Britain’s leading edge modernity.
Whilst Britain is among the least corrupt nations on earth, today a degree of embarrassment has entered the public arena as the means by which Conservative politician and business consultant Johnny Mercer, who has served as the Member of Parliament for Plymouth Moor View, received his salary, a very poignant matter for the FX business.
Mr Mercer, who is thought to want to run for the position of leader of the Conservative party, has been under scrutiny for his non-executive director role at the Crucial Academy, for which he receives an £85,000 salary.
It is also funded by a company called Surge Financial Limited, which earned a 25% commission for marketing bonds by London Capital & Finance, a company whose insolvency was revealed recently by FinanceFeeds.
The unwritten but assumed notion that traditional investment providers such as bond issuers and stockbrokers are somehow more reliable and take a longer term, more risk averse approach to spot FX and CFD firms can be written off, as one of Britain’s fixed rate bond issuers, London Capital & Finance, leaves thousands of investors in the lurch after promising them an 8% return on investment.
The company, which on December 28, 2018 was the subject of a publication by the Financial Conduct Authority (FCA) of relating to’Information for London Capital and Finance PLC investors’ on the FCA website, had been investigated by the regulator and found to be mis-advertising its products.
This notified investors that the FCA was conducting an investigation into the affairs of London Capital & Finance and had imposed certain requirements on the company, notably that the company may not without FCA consent deal in any way with its assets, including the money held in its bank accounts. The Information included a short series of questions and answers to which readers of this website are referred for further details.
Since then, London Capital & Finance website has stated that the directors of of the company appreciate that the Information, coupled with the earlier direction given by the FCA to London Capital & Finance to withdraw all its marketing materials relating to its Fixed Rate ISA or Bond, was likely to cause considerable anxiety to LCF bondholders and borrowers.
London Capital & Finance had its accounts frozen by the Financial Conduct Authority on 13 December 2018 following an investigation, and at the time, the company had raised up to £214 million from 14,000 investors, including pensioners.
Mr Mercer – who is now facing calls from investors to quit as an MP – has not responded to requests for comment from any mainstream media entity in the UK that has attempted to approach him. The Conservative MP for Plymouth Moor View is a non-executive director of Crucial Academy, which trains military veterans and aims to find them employment. Himself a former Army officer, Mr Mercer is contracted to work four hours per week, a rate of more than £350 per hour.
The basic annual salary for an MP is £79,468, and they also receive expenses to cover the costs of running an office.
In a statement, Mercer said: “Clearly there is some co-ordinated effort to go after me at present – the reasons for which are unclear. “Let me be very clear from the outset – I totally reject the assertion that I have done anything wrong in working as a non-executive director of Crucial Academy.
“It is possible to draw a link between an individual and any number of companies. I have sought rigorous assurances that at no stage was capital used from any business with LCF, in Crucial Academy. I received those assurances.”
He added that he had no role in any “historical link” between the firms, which the BBC uncovered in accounts after Surge Group appeared to loan the Crucial Group £325,095.
The SFO explains that, on March 4, 2019, four individuals were arrested in the Kent and Sussex areas. All four individuals have been released pending further investigation.
The operation was coordinated with the assistance of the National Crime Agency, City of London Police, Kent Police, Sussex Police and the South East Regional Organised Crime Unit (SEROCU). This investigation was opened following a referral from the Financial Conduct Authority (FCA) to the National Economic Crime Centre (NECC).
“I ‘get’ that this is an attempt to tie me to another company – London Capital and Finance – that has imploded, amid allegations of fraud,” said Mr Mercer this week.
“I have never met, heard of or had any interest in this company previously, yet alone the financial products they offered. I have huge sympathies with bondholders, and would support them in any future action they take to try and recover their position.” he said.
At the time of its demise, FinanceFeeds reported that According to the FCA, investments in the company’s mini-bonds are unlikely to be covered by the Financial Services Compensation Scheme, raising doubts as to whether investors will be able to get their money back.
The Financial Services Compensation Scheme covers loss of client capital in certain circumstances, with a safety net of up to £85,000 which is the highest of any national government-run compensation scheme, however there are certain cases in which firms operate outside the guidelines for cover and therefore capital, as well as profits are not covered.
The company lent money to small and medium-sized businesses, funding that lending through bonds paying between 3.9 per cent and 8 per cent a year.
Smith & Williamson LLP was appointed joint administrators yesterday after being called in by the company directors. A statement on the website of the FCA said that: ‘The directors of the company received independent advice and determined that the company was insolvent.’
A statement from the administrators said: ‘Investors in London Capital & Finance’s mini-bonds were retail clients who were UK taxpayers and who fall into the category of either high net worth individuals, sophisticated individuals, self-certified sophisticated individuals or restricted investors, as noted on its website.’