FSCS starts to offer LCF investors compensation under government scheme
The Financial Services Compensation Scheme (FSCS) has gone live with the government’s redress scheme to reimburse eligible London Capital & Finance victims.
In an update, the lifeboat system said it has contacted around 1,000 bondholders and expects all eligible customers to receive their offer within five months.
FSCS’s letters include details on what they need to do to accept the offer, the payment terms and some calculation examples.
The government-funded scheme will be available to all individual bondholders who have not already compensated by the FSCS. Per the proposed terms, the government would pay 80 percent of the compensation, up to a maximum of £68,000, that LCF clients would have received if they were eligible for FSCS protection.
Those who still want to receive their principal investment in full can reject the offer when the FSCS contacts them by April 20, 2022. Approved claimants are expected to get their payments later this month.
“Where bondholders accept the offer of compensation under the scheme, FSCS will automatically take over all remaining rights they might have against LCF. This means that bondholders won’t be able to make their own claim in the insolvency of LCF, except in certain circumstances,” the government stated.
More becoming eligible for compensation
Around 12,000 investors suffered major losses following the £236 million collapse of the mini-bond issuer in 2019. However, a small number of LCF received compensations so far while the vast majority of the bondholders are still waiting to hear if they have any chance of getting their money back.
The Financial Services Compensation Scheme paid compensation to investors who relied on claims for misleading advice in the collapsed mini-bond provider. The fund said it was aware that some Strand customers were advised by independent financial advisers to transfer existing assets to the firm that was put into special administration in May 2017.
To kickstart with the process, the FSCS reviewed almost a million pieces of evidence in order to determine which customers had been given misleading advice by LCF. It has also gained access to an additional 100,000 emails held within LCF’s email server, which extended the time frame to complete the process beyond the original deadlines.
