THE Financial Services Compensation Scheme (FSCS) has urged customers of collapsed mini-bond provider London Capital & Finance (LCF) to register for updates as it looks at whether there are grounds for compensation.
The FSCS says it wants to keep customers up to date as it works with the Financial Conduct Authority (FCA), administrators and legal experts to decide if investors can claim compensation from the firm, which went into administration in January. It expects the investigation to be a long process due to the complexity of the case.
It said it has reviewed promotional materials from LCF which stated that the mini-bonds were not FSCS protected. However, after further analysis of LCF’s business practices, investment materials, and calls recorded with investors, FSCS is now investigating whether regulated activities were in fact carried out which might give rise to a claim.
The FSCS said it also wants to further explore the relationship between LCF and Surge Financial Ltd.
“It is clear that LCF investors were badly let down so to help we want to be as transparent as possible over our process,” said an FSCS spokesperson.
“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.
“This is a highly intricate case though, so we expect our investigation may take some time. We appreciate investors’ need for certainty so we can assure them that we are treating the case with the utmost urgency.”
LCF went into administration in January after the regulator ordered it to halt its regulated activity and stop marketing products. The FCA estimates 14,000 people had invested £214m through the bonds.
The P2P lending industry has been quick to distance itself from mini-bonds, arguing they are much riskier than P2P loans.
Read more: Zopa distances P2P from mini-bonds
Meanwhile, the heads of some of the largest crowdfunding websites including Seedrs and Crowdcube have criticised the FCA for being slow to take action against LCF, whose high-risk bonds were marketed as ‘fixed rate ISAs’ offering an eight per cent annual return.