London Capital & Finance plc
Under investigation 30 January 2019
FSCS deals with compensation claims when financial firms go out of business. We were set up under the Financial Services and Markets Act 2000, and our rules, which govern when we can pay compensation, are set by the UK regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
For investment compensation claims, several criteria need to be met:
- there must be an eligible claimant;
- with a protected claim;
- against an authorised firm that is in default.
The ‘protected claim’ part means that the firm in default must owe a civil liability to the customer that would have enabled the customer to sue the firm in court. Importantly, this civil liability has to be in connection with a regulated activity carried out by the firm.
Whether or not a ‘regulated activity’ took place can sometimes take time to find out, as it depends on an in-depth analysis of the circumstances in each case (e.g. were particular words used when the firm communicated with customers). It’s also legally complex – there are many different regulated activities, and different exclusions and exceptions can apply to each.
When an investment firm fails, we know that this can have dire, even tragic, consequences for the firm’s customers. In every case we work as quickly as possible to try to establish whether there are ‘protected claims’ that would allow us to put the firm into default and start accepting claims for compensation. However, the circumstances where we can pay compensation are strictly governed by our rules.
See our investment compensation limits and their conditions on our Investments page.
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04 Oct, 2019
Since our last update, FSCS has made some progress in gathering and examining information and evidence. This includes obtaining further records from Surge Financial Ltd (“Surge”) of customers’ contact with them. We are also continuing to work with Smith & Williamson LLP, the joint administrators of LCF, to obtain further information to assist with our investigations.
Surge is an online marketing company which acted on behalf of LCF, facilitating bond applications from prospective bondholders. Following an initial review of its call recordings and emails to investors, we believed that Surge, acting on behalf of LCF, provided some LCF clients with misleading advice, in both telephone calls and emails.
The further records which have been shared with us will help FSCS determine whether LCF customers are eligible for compensation.
We appreciate that LCF customers are keen to know whether they will be eligible for compensation, and our aim is to clarify the position, so we can make an announcement regarding eligibility as soon as possible. However, the LCF case is very complex, and this may take some time.
A further 2,200 people have completed our fact-finding questionnaire. This takes the total to 7,511, which represents around three-quarters of LCF customers. We'd encourage the remaining LCF customers to complete the questionnaire. This will in no way prejudice any future claim they may have with FSCS.
Claiming with FSCS directly means you get 100% of the compensation you are owed, up to our limit of £85,000, as we provide a free service to customers.
02 Aug, 2019
In the month since our fact-finding questionnaire went live just over 5,500 people have completed it. We are analysing the information provided and it is already helping our ongoing investigation into the nature and extent of any protected claims. We would encourage other investors to complete the questionnaire and remind them that this will in no way prejudice any future claim they may have with FSCS.
Since our last update we have also had a cooperative meeting with representatives from Surge Financial Ltd. They have agreed to provide further information that will help our investigation and we look forward to receiving that soon.
Customers are reminded that coming to us directly will mean they get 100% of the compensation that they are owed, up to our limit of £85,000, as we are a free service.
As we still do not have all the information we need to start accepting claims, and this is a complex case, it will be some time until we are ready to make any further announcements on the process itself.
08 Jul, 2019
More than 4,390 clients of London Capital & Finance completed our fact-finding questionnaire in the first week it was posted.
We want to encourage even more LCF clients to complete our questionnaire as it will enable us to build a better picture of the nature and extent of potentially misleading advice that they may have received.
The information gathered through this process is purely to help us better understand the individual circumstances of investors, and the number of customers who may have been impacted.
Should there be grounds for compensation and we start accepting claims, information given in the questionnaire by LCF clients will not prejudice their claim.
Investors who come direct to FSCS will pay no charge, as we are a completely free service.
28 Jun, 2019
Our investigation into LCF leads us to be believe that there are protected claims, which may result in compensation for some of its investors.
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.
At this stage though we don’t have access to all of the information needed to determine the nature and extent of this misleading advice, and we’re still working with the relevant parties on gaining access to it.
We’ve therefore launched a pre-application questionnaire, a link to which you’ll find below, for investors to complete in order to help us build a better picture of this advising.
You may have already completed a questionnaire for the administrators, Smith and Williamson, but we still need the information to help us better understand individual investor’s circumstances and the number of customers that may have been impacted. We’ll provide a further update next month.
31 May, 2019
Over the last few weeks we’ve been reviewing whether there may be grounds for compensation. As we’ve previously mentioned, this work is focused on the relationship between LCF and Surge Financial Ltd and the extent to which either company may have been carrying out regulated advising, arranging or other activities that could give rise to some eligible claims for compensation.
Following our investigations, we now understand LCF’s business practices much better, and we believe there are sufficient grounds for us to carry on exploring these issues. One increasingly important aspect is the need to consider the different ways investors dealt with the firm when buying their products, as this could impact whether compensation is due or not. This is a complicated case involving significant factual analysis, external legal advice and close work with both the FCA and the administrators, so it will take time.
10 May, 2019
The promotional materials that we’ve reviewed stated that the LCF mini-bonds were not FSCS protected. However, after a further review of LCF’s business practices, investment materials, and calls recorded with investors, FSCS is investigating whether regulated activities were carried out that might give rise to a claim.
This work and our legal analysis supports our view that LCF’s core activity of issuing their mini-bonds in the UK was not protected, but there are further issues that need examining. We’re focusing on whether there was any regulated advising, arranging or other activities that may trigger our compensation. We also need to better understand the nature of the relationship between LCF and Surge Financial Ltd.
01 May, 2019
London Capital & Finance plc (LCF) entered administration on 30 January 2019. The Administrators are representatives from Smith & Williamson LLP. Further information is available on their website at: https://www.smithandwilliamson.com/london-capital
FSCS understands that LCF issued its own mini-bonds to investors and that mini-bonds issued in the UK were not transferable securities. The act of issuing these investments is not a regulated activity, and so this is not something that FSCS can protect. For this reason, although the firm is insolvent, we’re not currently able to declare the firm in default under our rules, or to start accepting claims for compensation.
We’re continuing to work closely with the administrators and the FCA to try to establish whether LCF might have carried out any other regulated activity for which we could compensate customers. As explained above, this requires an in-depth analysis of this case’s particular circumstances. The firm’s records and information provided by customers and other sources will be used to build a picture of how the firm operated, and while we understand investors’ frustration and desire for clarity, this process will take time.
As our work progresses we will update this page with further information for LCF’s customers, including if we determine that we can start to accept claims against the firm.