The Financial Services Compensation Scheme (FSCS) has announced several key decisions for claims in relation to the London Capital and Finance (LCF) failure.

LCF entered administration in January 2019, and the FSCS has since investigated many alternative possible bases for claims. Around 11,600 bondholders purchased 16,700 bonds from LCF worth £237m.

The compensator indicated it would protect the 159 bondholders who switched from stocks and shares ISAs to LCF bonds, with these customers not required to take any action.

The FSCS, however, said it is unable to protect the 283 bondholders who dealt with LCF before it was authorised to carry out financial services business in June 2016. The FSCS said it would contact these customers to confirm this.

While the FSCS has maintained the act of issuing mini bonds is not a regulated activity – and therefore not something it protects – the compensator concluded there would be some customers who were given misleading advice by LCF, and have valid claims for compensation as a result.

The compensator, however, also expects that many customers will not be eligible for compensation on this basis.

FSCS CEO, Caroline Rainbird, commented: “I regret that LCF investors impacted by the firm’s failure have been waiting several anxious months to find out whether or not they may be eligible to receive compensation from FSCS.

“In reaching this stage, it was essential we carried out a thorough factual and legal analysis. To assist our ongoing investigations, we have received over 7,000 questionnaires and obtained thousands of telephone recordings and a vast number of emails. We have also taken legal advice.

“I appreciate that the initial decisions and outlook we are announcing today are likely to be disappointing to many LCF customers. 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.”

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