NE trading firm London Capital Group posted a plunge in pre-tax profits yesterday after upping the amount set aside to cover customer compensation claims by £1.9m.
In February 2011, the Financial Ombudsman Service (FOS) ruled London Capital was liable for customer rebating errors on one of its foreign exchange platforms
The spread betting firm yesterday increased its compensation provision for the FOS claims from last year’s level of £3.2m to a maximum level of £5.1m to pay the compensation.
This dented pre-tax profits, from £2.69m in the first half of 2011 to £0.15m for the first half of this year.
Chief executive Simon Denham said: “We’ve provided the full amount that we can be found against. The money might fall lower and obviously we hope that it will fall lower.”
London Capital was left on the hook to pay compensation to customers which invested in third party foreign currency accounts managed on its platform.
After two years contesting the claims London Capital said yesterday that negotiations had seen 25 per cent of outstanding claimants agree to a settlement.
The firm also increased divisional revenue by 12 per cent.
“It’s been truly dull markets conditions, so we’re pleased to beat revenues compared to last year,” added Denham.