Mini-bond investors get go-ahead for FSCS judicial review
Investors in collapsed mini-bond provider London Capital & Finance (LC&F) have received a boost in their fight for greater compensation when they were given the go-ahead for a judicial review under the Financial Services Compensation Scheme (FSCS).
The mini-bond investors launched the review in March and have now received the green light for their case to be taken to court after a judge refused the FSCS’s request for the case to be dismissed.
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The investors want to quash the financial lifeboat body’s compensation decision and are looking for another decision and greater compensation.
Last month the FSCS announced that it had paid more than £20m in compensation to those LC&F investors it believes received misleading advice from LC&F.
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Thomas Donegan, partner at law firm Shearman & Sterling, which is working on the case, welcomed news of the judicial review going ahead, and was confident the bondholders will come out on top.
“We are very pleased that the court has given permission for this important case to be heard and that the LC&F investors’ quest for justice and recompense will continue,” he said.
“The courts decided it’s a good case. The order doesn’t set a date, we hope it’s this year, but may slip into next year because the courts are disrupted because of Covid-19.
“We feel confident in our arguments and look forward to presenting them to the court. We feel like our arguments are strong and we feel that we are on the side of the virtuous on this one.”
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Jonathan Swil, counsel at Shearman & Sterling, said that the claimants will now have the opportunity to let the court decide on the legality of the FSCS’s decision.
“A positive outcome in the case will have a real impact not just on their lives, but on the lives of many of the other investors who have lost significant investments following the collapse of LC&F,” he said.
As a result of the mini-bond provider’s collapse, the FSCS said it was increasing its levy for regulated firms during the 2020/21 year, setting aside £44m for LC&F claims.
“We share the real desire to help reduce the levy on the industry and protect customers. As part of our strategy, the FSCS is collaborating with the Financial Conduct Authority, the Financial Ombudsman Service (FOS) and The Insolvency Service around phoenixing,” said Fiona Kidy, chief financial officer at the FSCS.
“In addition, the FSCS has sought to address these concerns by convening industry panels to exchange information on current issues and potential concerns in the investment and pensions, and general insurance markets.”
