Thursday 9 January 2020 11:51 am

Financial services lifeboat says only a handful of London Capital & Finance investors eligible for compensation

The Financial Services Compensation Scheme (FSCS) today announced the “disappointing” news that only a small number of investors in collapsed mini-bond company London Capital & Finance (LCF) are eligible for compensation.

It said it would protect the 159 bondholders who switched from stocks and shares ISAs to LCF bonds.

The FSCS said it is unable to protect the 238 bondholders who dealt with LCF before it was authorised to carry out financial services business on 7 June 2016.

The FSCS said it had concluded that some customers were given misleading advice by LCF and will have valid claims as a result.

Read more: London Capital & Finance investors could be entitled to compensation

But it said it expected that many customers will not be eligible for compensation on this basis.

Mini-bond firm LCF collapsed in January 2019 owing £236m to more than 11,000 investors.

The circumstances around its failure are being investigated by the Financial Conduct Authority (FCA) and the Serious Fraud Office (SFO).

The FSCS’s chief executive Caroline Rainbird said: “I appreciate that the initial decisions and outlook we are announcing today are likely to be disappointing to many LCF customers. 

Read more: First payout to London Capital & Finance investors pushed back

“We are, however, working as quickly as we can to establish a suitable process for determining customers’ claims, and expect to be in a position to start this process in the next few weeks.”  

Rainbird said the FSCS had carried out a “thorough factual and legal analysis” in coming to its decision.

She said the body had received over 7,000 questionnaires and obtained thousands of telephone recordings and a “vast number of emails”.