Financial Services Compensation Scheme explores possible grounds for LCF compensation

Maria Nikolova

FSCS is now investigating whether regulated activities were in fact carried out which might give rise to a claim.

The UK Financial Services Compensation Scheme (FSCS) has advised London Capital and Finance customers to register for updates via its website at https://www.fscs.org.uk/failed-firms/lcf/. The body actually provides a beam of hope for those affected by the collapse of LCF.

FSCS says it is keen to ensure LCF customers are kept up to date as the body continues to explore whether there are grounds for compensation. FSCS is working closely with the Financial Conduct Authority (FCA), administrators and external legal counsel.

The promotional materials that the FSCS has reviewed stated that the LCF mini-bonds were not FSCS protected. However, after further analysis of LCF’s business practices, investment materials, and calls recorded with investors, FSCS is now investigating whether regulated activities were in fact carried out which might give rise to a claim.

This work and FSCS’s legal analysis supports its view that LCF’s core activity of issuing their mini-bonds in the UK is not protected but that there are further issues that need examining. The body is now therefore focusing on whether there was any regulated advising, arranging or other activities which may trigger our compensation. FSCS also needs to better understand the nature of the relationship between LCF and Surge Financial Ltd.

A Spokesperson for the FSCS said:

“This is a highly intricate case though, so we expect our investigation may take some time. We appreciate investors’ need for certainty so we can assure them that we are treating the case with the utmost urgency.”

An update on the matter from April 17, 2019 stated:

“London Capital & Finance plc is in Administration. The Administrators are representatives from Smith & Williamson LLP.

FSCS understands that the firm issued its own mini-bonds to investors on a non-advised basis and that these mini-bonds were not transferable securities. This activity is not a regulated activity under the Regulated Activities Order and, therefore, is not FSCS-protected. For this reason, while the firm is insolvent, we’re not accepting claims against the firm.

Should we determine that there are circumstances that give rise to potentially valid claims, we’ll begin to accept claims against London Capital & Finance plc. If this happens, we’ll communicate this to customers on our website. We’re working closely with the Administrators to understand more about how the firm carried out its regulated activities”.

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