London Capital and Finance PLC (LCF) offered its clients a high-risk bond investment scheme marketed as a “Fixed Rate ISA”.
Unfortunately for 1000’s of investors, London Capital & Finance (LCF) was placed into administration on 30thJanuary 2019, leaving many investors out of pocket and looking to claim compensation.
News reports suggested they took £236m in investor money following a marketing campaign promoting their high risk bond scheme promoted as a “Fixed Rate ISA”.
After the recent collapse of LCF the Financial Conduct Authority (FCA) and the Serious Fraud Office (SFO) began an investigation into potential mis-selling.
It was discovered that LCF paid a Brighton based marketing agent called Surge PLC up to 25% commission for promoting its ISA. This commission payment amounted to £60m.
Surge PLC ran a series of web adverts promising 8% returns from secure ISAs in addition to marketing the ISA on a comparison website which was operated by a company with links to Surge PLC. This comparison site would compare the investments at LCF with the 1% and 2% return ISAs from high street banks.
As stated on LCFs website it was authorised by regulator the Financial Conduct Authority (FCA) – but the FCA said the authorisation was not the sale of bonds or ISAs. Their authorisation only covered them to provide consumer financial advice.
As a result of the FCAs findings at the time it subsequently ordered the advertisements should stop running.
Where did all the money go?
One of the appointed administrators Finbarr O’Connell said in a letter to bondholders that 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. This letter can be read by clicking here.
Investors were assured the funds and therefore the risk would be strategically spread across hundreds of companies but according to Companies House records, LCF loaned money to just twelve companies.
It has been discovered that the cash was loaned to companies that then “sub loaned” to other companies. Bondholders have raised concerns online about connections between the directors of companies that received money and those who ran LCF.
The Serious Fraud Office is also conducting an investigation into individuals associated with LCF.
The company’s administrators released a report which found that:
- There were a number of “highly suspicious transactions” involving a “small group of connected people” which led to large sums of investors’ money ending up in their “personal possession or control”
- A large number of borrowers don’t appear to have sufficient assets to pay back LCF investors
- Some transactions were “highly suspicious” or had “no commercial benefit” to investors
- Investors’ money was loaned to a complex web of companies, many of which were controlled by people involved in LCF
- A quarter of all the money invested was paid straight to LCF’s marketing company Surge
Can You Claim Compensation?
At the time of the FCAs investigation, the Financial Services Compensation Scheme (FSCS) said it would “explore whether there are grounds for compensation”
The compensation body had earlier said investors wouldn’t be able to lodge claims as the scheme was unregulated.
Due to mounting pressure however, the FSCS has said it could pay compensation to clients who received ‘misleading advice’ to invest in collapsed mini-bonds.
A leading law firm wrote to the FSCS, pointing out LCF carried out regulated activities within two spheres – dealing in investments as principal and operating a collective investment scheme.
The FSCS said that after reviewing the business it concluded that some clients were advised by Surge Financial, which acted on behalf of LCF. As advice is a regulated activity investors can therefore claim they are eligible for compensation from the lifeboat fund.
A spokesperson for FSCS said: ‘Throughout our investigation into LCF we have been as transparent as possible so that both LCF investors and our levy payers know where they stand.
‘Having established that there are customers who were given misleading advice and therefore may be eligible for compensation, we now need to determine the full extent of this advising activity.’
What To Do Next
Get in touch with our experienced and friendly legal team at ClaimExperts.co.uk and discover if you are eligible to make a claim to get back your investment in to LCF. ClaimExperts.co.uk is a trading style of Smooth Commercial Law. Smooth Commercial Law is regulated and authorised by the Solicitors Regulatory Authority (SRA) and offer a no obligation initial review.
Simply complete the claim form and a member of our legal team will call you back to discuss your potential claim.