FSCS receives more than 5,500 replies to London Capital & Finance questionnaire in one month
The Financial Services Compensation Scheme has also had a cooperative meeting with representatives from Surge Financial Ltd.
The UK Financial Services Compensation Scheme (FSCS) has earlier today provided another update regarding the London Capital & Finance matter.
In the month since FSCS’s fact-finding questionnaire went live just over 5,500 people have completed it. The Scheme says it is analysing the information provided and it is already helping its ongoing investigation into the nature and extent of any protected claims. FSCS would like to encourage other investors to complete the form and remind them that this will in no way prejudice any future claim they may have with FSCS.
Since the preceding update, FSCS has also had a cooperative meeting with representatives from Surge Financial Ltd. They have agreed to provide further information that will help the Scheme’s investigation and the body looks forward to receiving that soon.
Customers are reminded that coming to FSCS directly will mean they get 100% of the compensation that they are owed, up to FSCS’s limit of £85,000, as the Scheme is a free service.
As FSCS still does not have all the information it needs to start accepting claims, and this is a complex case, it will be some time until the body is ready to make any further announcements on the process itself.
As the Scheme confirmed in its update on June 28, 2019, its investigation into LCF leads FSCS to believe that some investors are likely to have compensatable claims. FSCS can pay compensation when a firm in default owes an eligible claimant a civil liability in connection with a regulated activity.
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.