London Capital & Finance: £236m firm collapses

[Itsallaguess]

A lesson for everyone in the 'if it looks too good to be true' category.....

Thousands of people who invested in a high-risk bond scheme marketed as a "Fixed Rate ISA" fear they have lost everything after the company collapsed. London Capital & Finance (LCF), now in administration, took £236m following a marketing campaign that is now under investigation for mis-selling.

LCF paid an agent, Brighton-based Surge PLC, 25% commission - which amounted to £60m - to run the marketing campaign. A series of web adverts promising 8% returns from secure ISAs were released and in addition a comparison website - run by a company with links to Surge - would compare the 1% and 2% return ISAs from high street banks with the investments at LCF.

LCF was authorised by regulator the Financial Conduct Authority (FCA) - but the FCA said the authorisation was to provide consumer financial advice, not the sale of bonds or ISAs.

Where did the money go?

In a letter to bondholders administrator Finbarr O'Connell said once the £60m to Surge was paid, returns of up to 44% would be required in order for LCF to make good on its promises.

Investors were told the funds - and therefore risk - would be spread across hundreds of companies but, according to Companies House records, LCF loaned money to 12 - four of which have never filed accounts, nine are fewer than three years old, and nine had loans from LCF in 2017.

Much of the cash was loaned to companies that then "sub loaned" to others. Bondholders have raised concerns about connections between the directors of companies that received money and those who ran LCF.

https://www.bbc.co.uk/news/uk-england-47454328

The Financial Conduct Authority really ought to be doing better with situations like this....

Cheers,

Itsallaguess

[Redmires]

This has featured on Radio 4's 'Moneybox' recently, including the current episode. A very sad tale indeed but nothing ever becomes of the tw*ts who perpetrate these schemes.

https://www.bbc.co.uk/programmes/m00035h0

[Itsallaguess]

It looks like the FSCS is investigating the possibility that people affected by the collapse of London Capital & Finance may have grounds to be able to claim compensation -

Thousands of small-scale investors who lost their savings by investing with London Capital & Finance (LCF) have been given fresh hope they may qualify for compensation.

Nearly 12,000 people put £236m into the firm which collapsed in January.

The Financial Services Compensation Scheme said it would "explore whether there are grounds for compensation"

The FSCS said LCF investors should register with the FSCS via its website for updates of its investigation.

"By registering with us they will get regular updates on our investigation and this will be the best way for them to hear whether we believe there are grounds for compensation.

https://www.bbc.co.uk/news/business-48235410

Anyone that's been affected by this issue should register their interest on the Financial Services Compensation Scheme page below -

Receive the latest news about how FSCS is handling the LCF failure -

https://www.fscs.org.uk/failed-firms/lcf/

Cheers,

Itsallaguess

[stevensfo]

The bit I don't understand is:

LCF was authorised by regulator the Financial Conduct Authority (FCA) - but the FCA said the authorisation was to provide consumer financial advice, not the sale of bonds or ISAs.

So LCF was authorised to 'talk' about their bonds, but not to actually 'sell' them? What would be the point of that?


Steve

[Itsallaguess]

The bit I don't understand is:

LCF was authorised by regulator the Financial Conduct Authority (FCA) - but the FCA said the authorisation was to provide consumer financial advice, not the sale of bonds or ISAs.

So LCF was authorised to 'talk' about their bonds, but not to actually 'sell' them? What would be the point of that?

It does seem odd, but I suppose the blessing for people who may have lost money here is that it seems that where LCF may have overstepped their regulatory boundaries, the fact that there was regulatory involvement may actually open the door for financial compensation via the FSCS....

Cheers,

Itsallaguess

[Alaric]

So LCF was authorised to 'talk' about their bonds, but not to actually 'sell' them? What would be the point of that?

It's a loophole. The other loophole that the firms involved exploited was that the bonds were only supposed to be promoted to high net worth or sophisticated investors. The profile of those who lost out suggests otherwise.

[Slarti]

I've got them on my email blacklist because they used to send spam, promising silly returns, to people at my domain - people who had never existed!


Glad to see them go, now all that is needed is for their directors to be prosecuted.

Slarti

[EssDeeAitch]

I spoke to them when I started self investing. The salesman seemed very, very keen to assure me of the companies stability and probity but I just could not see my way clear to believe him.

If it seems to good etc........

[ffacoffipawb64]

Quite clear this was a scam from the outset.

Wonder what will happen with Blackmore Bonds and Capital Bridge, both also paid 25% commission to Surge.

[Alaric]

Wonder what will happen with Blackmore Bonds and Capital Bridge, both also paid 25% commission to Surge.

Blackmoor is closed to new business. Capital Bridge still appears open to new applicants. The website seems upfront about the risks.

https://www.thecapitalbridge.co.uk/risks

It's right that the FSA has exceptions to its nannying for those who can regard themselves as experienced in investment matters or even just rich. It does however leave loopholes for the promotion of unregulated products that aren't what they might seem at first sight.