FSCS sets aside £44m for London Capital & Finance claims
The Financial Services Compensation Scheme (FSCS) has raised its levy for regulated financial firms, partly to cover £44m in estimated claims from London Capital & Finance (LCF) investors.
During 2020/21 the FSCS confirmed it will levy firms £649m, £14m more than it estimated in mid-January.
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The £649m takes into account £44m to cover estimated pay-outs to investors who lost money from the collapse of mini-bond provider LCF in January 2019.
However, this was partly offset by savings in other classes, mainly from the scheme’s deposits and general insurance distribution, mean that the overall increase from January’s estimate is £14m.
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“We publish this outlook during what is an extremely challenging time for everyone, and we appreciate that the impact of Covid-19 is likely to be felt for a considerable period of time,” said Caroline Rainbird, chief executive of the FSCS.
“Although the pandemic has altered FSCS’s working practices, it has not impacted on the day to day delivery of our service, and we have continued our business as usual.
“However, we recognise that business as usual will not be possible for everyone and that some may face challenges due to the current economic situation.
“The overall increase in the FSCS levy since the January forecast partly reflects the ongoing progress we are making in relation to the LCF failure.
“As we announced earlier this month, we have now started the process of reviewing individual LCF claims relating to misleading advice. Whilst it is too early to say how many LCF customers will be eligible for compensation, for the purpose of the levy we have estimated an amount of £44m.”
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LC&F went into administration in January 2019 after the regulator ordered it to halt its regulated activity and stop marketing products. The Financial Conduct Authority (FCA) estimates 14,000 people had invested £214m through the bonds.
Mini-bonds are an unregulated investment class so are not usually eligible for FSCS protection, but the FCA found investors were misled into believing LCF investments were ISA-eligible.
Earlier this month, the FSCS said it would start issuing decisions on LCF claims relating to misleading advice given to its customers before the end of May.
