UK Govt says it takes the failure of London Capital and Finance very seriously
Questions around the collapsed firm keep piling up, with the Economic Secretary to the Treasury commenting on the matter.
There has not been much positive news around the collapse of London Capital and Finance, and the questions around the demise of the firm keep piling up. Adding to the chorus of official comments on the matter, John Glen, Economic Secretary to the Treasury, said on Friday that the Government takes the failure of London Capital and Finance (LCF) very seriously and is closely monitoring current developments.
John Glen noted the recent launch of an investigation into individuals associated with LCF by the Serious Fraud Office, working in conjunction with the Financial Conduct Authority (FCA).
HM Treasury keeps the regulatory framework for financial services under constant review, and updates it as necessary, John Glen added.
The marketing and promotion of minibonds, such as those sold by LCF, are already subject to financial promotion restrictions outlined in the Financial Services and Markets Act 2000. In the UK, responsibility for regulating the promotion and marketing of minibonds lies with the FCA, and firms that fail to meet any of the relevant requirements may be subject to enforcement action. Whilst the promotional material is regulated by the FCA, the product itself – mini-bonds – are unregulated.
Let’s recall that, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, has urged the FCA to consider opening a statutory investigation into possible regulatory failure surrounding LC&F. HM Treasury has the power to require the regulator to conduct such an investigation. Mrs Morgan has also written to John Glen to urge the Treasury to use this power if the FCA declines to investigate.
On Friday, March 22, 2019, John Glen failed to provide any positive news with regard to compensation. Turning to the matter of compensation for those affected by this issue, the Financial Services Compensation Scheme’s (FSCS) current assessment is that LCF’s activities are not FSCS-protected, which means LCF’s investors will not be eligible to claim for compensation from the FSCS.
However, the FSCS is working closely with the administrators to understand more about LCF’s activities. If there are circumstances that give rise to potentially valid claims, the FSCS will begin to accept claims against LCF and communicate this on their website.