FSCS updates on claims related to London Capital & Finance failure

Maria Nikolova

The scheme will protect the 159 bondholders who switched from stocks and shares ISAs to LCF bonds.

The UK Financial Services Compensation Scheme (FSCS) has earlier today announced key decisions for claims regarding the London Capital and Finance (LCF) failure.

FSCS says it will protect the 159 bondholders who switched from stocks and shares ISAs to LCF bonds. Customers in this category are not required to take any action. The Scheme is set to pay compensation to these customers by the end of February 2020.

The Scheme, however, is unable to protect the 283 bondholders who dealt with LCF before it was authorised to carry out financial services business (on June 7, 2016). FSCS will contact these customers to confirm this.

FSCS maintains that the act of issuing mini bonds is not a regulated activity, and is therefore not something protected by FSCS, the Scheme has determined there will be some customers who were given misleading advice by LCF and have valid claims for compensation as a result. However, FSCS expects that many customers will not be eligible for compensation on this basis. FSCS will provide a further communication with details of when and how customers in this category can submit their claims. The Scheme will aim to start reviewing these advice claims in the first quarter of 2020.

A further update on the matter is expected by the end of February. In the mean-time LCF customers do not need to take any action.

Caroline Rainbird, FSCS’s CEO said: “To assist our ongoing investigations, we have received over 7,000 questionnaires, and obtained thousands of telephone recordings and a vast number of emails. We have also taken legal advice”.

LCF entered administration on January 30, 2019, and since then FSCS has investigated many alternative possible bases for claims. Around 11,600 bondholders purchased 16,700 bonds from LCF worth £237 million.

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