FSCS not accepting claims against London Capital & Finance

Maria Nikolova

Although the firm is insolvent, the FSCS is not accepting claims against the firm.

The UK Financial Services Compensation Scheme (FSCS) has earlier today posted a rather dismal announcement concerning London Capital & Finance plc. As FinanceFeeds has already reported, the firm has entered into Administration.

In today’s announcement, the FSCS notes that London Capital & Finance plc issued its own mini-bonds to investors on a non-advised basis. 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, the FSCS is not accepting claims against the firm.

However, if the FSCS determines that there are circumstances that give rise to potentially valid claims, it will begin to accept claims against London Capital & Finance plc. The FSCS is working closely with the Administrators from Smith & Williamson to understand more about how the firm carried out its regulated activities.

Finbarr O’Connell, Adam Stephens, Colin Hardman and Henry Shinners (“the Administrators”) all of Smith & Williamson LLP, were appointed by the Court following an application to Court by the directors of the company.

Whilst the directors of London Capital & Finance made the application for the appointment of Administrators, the FCA consented to the appointment of the named Administrators. The Administrators were not approached directly by the company or its directors but rather by a third party who was aware of LCF’s need for independent insolvency advice.

LCF has entered into administration following action by the FCA. The regulator has determined that “the manner in which LCF was promoting its bonds was misleading, not fair and unclear”.

On December 10, 2018 the FCA deemed it necessary to require LCF to immediately withdraw its financial promotions in relation to the bonds. In order to further protect investors, on December 13, 2018 the FCA imposed certain requirements on LCF including (a) not to dispose of or deal with its assets, save in limited circumstances (b) to cease conducting all regulated activity and (c) not to communicate any financial promotions. These requirements were imposed pursuant to a voluntary application by LCF. The requirement in relation to LCF’s assets was subsequently amended on December 18, 2018, to further restrict LCF from dealing in any way with its bank accounts without the prior approval of the FCA.

As a result of the above, LCF has been unable to raise further monies from investors.

Professional advice was sought and the company was advised that it was insolvent and that it should be placed into administration.

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