Off you go, old chap. British politician may lose job over £237m electronic trading fail

British politician Johnny Mercer is being coerced into quitting his job at Crucial after 700 defrauded customers go to creditors meeting of LCF

The high profile and very unpleasant demise of British electronically traded bond investment firm London Capital & Finance (LCF) has created a substantial stir in the global financial capital of London.

Not only is LCF’s operations the subject of an investigation by the Serious Fraud Office, but its customers, who collectively have lost £237 million due to the firm’s promising of high returns and misadventures which have led it to demise, but the Financial Services Compensation Scheme (FSCS) has already stated that the losses are not covered.

This is because 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, as reported at the time by FinanceFeeds.

By March this year, the failure of the firm had reached the senior levels of British government, with officials stating that they ‘take the failure of the company very seriously.’

Unfortunately, that level of credibility, whilst very laudable, has been somewhat tarnished this week by revelations that Member of Parliament Johnny Mercer had been involved commercially with London Capital and Finance, via a venture that is connected to the firm, within which he has a second job paying him £85,000 a year for 20 hours a month at The Crucial Group, which trains army veterans in cyber security.

Yesterday, FinanceFeeds reported that Mr Mercer MP was under pressure for taking a salary from the firm, however now he is being urged to quit his job.

Mr Mercer, who is thought to want to run for the position of leader of the Conservative party, has been under scrutiny for his non-executive director role at the Crucial Academy, for which he receives an £85,000 salary.

It is also funded by a company called Surge Financial Limited, which earned a 25% commission for marketing bonds by London Capital & Finance, a company whose insolvency was revealed recently by FinanceFeeds.

Today, the outcome of a meeting of creditors of the failed London Capital & Finance has been documented, in which investors called on Mr Mercer to step down from his job at Crucial over its links with the scandal.

Dr Smarajit Roy, 79, whose wife Manjula, 70, invested £10,000 in LCF, said: ‘He should go, definitely. This is scandalous.’

Amanda Cunningham, who had invested £22,000 in LCF to save for her autistic son, said: ‘Politicians are there for the people, and Johnny Mercer is not thinking about the people. The best thing for him to do would be resign, or give that money back.’

Crucial was founded by the rather ominously named Paul Careless, a marketing guru who separately ran campaigns on behalf of LCF, encouraging investors to hand over their savings in exchange for stellar returns.

Careless’s companies earned fees of £54million for this service and were paid using investors’ funds.

Those at the meeting represent a very small proportion of the 11,000 investors, many of whom were senior citizens and have lost important portions of their life savings with no recourse.

It was actually gossip-hungry and somewhat sensationalist tabloid newspaper the Daily Mail which managed to effect a change of path between Crucial and London Capital & Finance, with Mr Careless having sold Crucial once the newspaper exposed the link between Crucial and London Capital & Finance.

‘Crucial no longer has any ties to the companies that were linked to London Capital & Finance,’ the firm said last night. Mr Mercer now says the row has been cooked up by political opponents to undermine him.

He said: ‘Clearly there is some co-ordinated effort to go after me, the reasons for which are unclear.’ Mr Mercer has stated that he would not give up his lucrative job, adding: ‘Crucial is a good organisation, doing good things, run by good people, with no financial link to LCF. I have no intention of resigning or cutting them adrift in this storm.’

Almost 700 victims of the failure attended a meeting in London yesterday to be updated by the administrators, Smith & Williamson, and representatives from law firm Mishcon de Reya.

Smith & Williamson told bondholders they could expect to receive 20 per cent to 25 per cent of their lost money back, up from advice of 20 per cent previously and administrators hope they can show that salesmen advised LCF investors to buy the bonds over the phone.

If they can prove that the investors received financial advice, they may be entitled to up to £50,000 under the Financial Services Compensation Scheme.

Four arrests have been made since the SFO launched its investigation.

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