London Capital & Finance victims should get more compensation due to regulator failings, complaints commissioner says
Victims of the London Capital & Finance (LCF) collapse could be in line for more compensation on the back of criticism from the complaints commissioner about the way the UK financial regulator treated customers of the now-defunct investment company.
18 March 2022: The Financial Conduct Authority (FCA) has now responded to the complaints commissioner's accusations. It said that although it could have been clearer providing information on London Capital & Finance (LCF), it does not agree that its information was misleading.
The FCA adds that it doesn't believe making compensation payments to claimants is appropriate, other than where it provided incorrect information or where there were delays in complaints handling. The FCA added that it felt an apology was the best solution and it will not reconsider LCF complaints.
Commissioner Amerdeep Somal, who published her final report on the regulator’s handling of the LCF case today (16 February), said the Financial Conduct Authority (FCA) should review the LCF cases again and change the way it calculated compensation. She said the FCA’s approach is “unjustified” and does “not stand up to scrutiny”.
She said she has received 440 complaints from investors who wrote to her about the FCA's handling of the situation. LCF went into administration in January 2019 and was declared "failed" in January 2020.
The FCA has until 15 March to respond to the report. It doesn't have to follow any recommendations made but said it will publish a response by the deadline.
Beware of scammers pretending to be LCF administrators
The FCA has separately published a warning for people to be aware of scammers posing as LCF administrators. Some investors have received calls, emails or other correspondence from fraudsters contacting them about dividend payments or compensation on investments.
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London Capital & Finance entered administration in 2019
LCF sold 'mini-bonds' – a type of high-risk investment that are essentially 'IOUs' issued by a company to an investor.
In December 2018, the FCA ordered LCF to remove marketing material, which it described as "misleading, not fair and unclear". Its concerns included the fact that LCF's bonds were being marketed as being ISA-eligible, when they were not.
During the same month, the regulator also imposed strict requirements on the firm, including bans on carrying out regulated activity and communicating any financial promotions. LCF was declared "failed" in January 2020.
In April last year, the Treasury announced that around 8,000 investors would receive compensation under a Government scheme, but this was capped at £68,000 with people impacted only receiving 80% of their money back.
The confirmation of this redress scheme followed an independent investigation, which last year concluded there were "significant gaps" in the policies of the FCA, which could have meant LCF bondholders didn't get the level of protection expected.