London Capital & Finance (LCF) investors could be entitled to compensation following the collapse of the mini-bond lender.
The company went into administration in January owing £236m to more than 11,000 investors who were unable to claim compensation as issuing mini-bonds is not a regulated activity.
However, the Financial Services Compensation Scheme (FSCS) has investigated LCF’s links with Surge Financial and concluded that it provided LCF clients with misleading advice.
The issuing of advice is a regulated activity, therefore some customers may be able to make a claim.
In a statement the FSCS said: “Following an extensive review of LCF’S business practices, we believe that Surge Financial Ltd, acting on behalf of LCF, provided a number of LCF clients with misleading advice.
“As this is a regulated activity, it means that FSCS protection would be triggered and that there may therefore be a number of customers with eligible claims for compensation.”
The FSCS has launched a questionnaire for investors to complete regarding advice given by Surge Financial.
The failure of LCF is currently being investigated by the Serious Fraud Office, which has made five arrests.
Paul Careless, the chief executive of Surge Financial, was arrested last week.
LCF’s scheme was marketed as a “Fixed Rate ISA” to customers, many of them first time investors.
LCF paid Surge 25 per cent commission for running the marketing campaign, which amounted to £60m.