The Financial Services Compensation Scheme (FSCS) has said that most London Capital & Finance bondholders it has not been able to compensate will be eligible for the £120m Treasury scheme.
Earlier this month, the government introduced new legislation which ensures that the FSCS will take charge of the Treasury’s compensation scheme for LCF bondholders, which was announced in April.
Separately to the scheme, the FSCS has already paid out £57.6m in redress for customers which it believes had bad advice but has stopped short of further payments.
LCF bondholders have been fighting for more compensation in an ongoing judicial review. Bondholders have won permission to take their case to the Court of Appeal following a High Court ruling against them.
A spokesperson from the FSCS told Peer2Peer Finance News said it expects most of those that were ineligible to be compensated under the Treasury scheme.
“We anticipate that most bondholders who FSCS has not been able to compensate will be eligible for the HM Treasury scheme, which was announced last month,” the FSCS spokesperson said.
“This scheme will pay compensation at 80 per cent of the amount available under our rules, so LCF customers will receive 80 per cent of the money they lost, up to a maximum of £68,000.”
Yesterday, four of the LCF bondholders who are themselves representing the rest of the mini-bond provider’s investors, welcomed the Treasury compensation scheme but said their judicial review case remains important for the bondholders and general public.
They said this was because if they are able to proceed with the appeal and succeed it would result in the remaining 20 per cent of those investments that were made on or after 3 January 2018 being compensated, when they otherwise would not be; and the taxpayer would be relieved of well over half of the £120m that the Treasury has offered to investors.
The Treasury has previously said it expects to pay out around £120m compensation to around 8,800 people in total.
Thomas Donegan, a regulatory partner at Shearman & Sterling, the law firm representing LCF bondholders in their judicial review for more compensation from the FSCS, has previously welcomed the Treasury scheme.
He has said it does not affect the ongoing legal battle and that the Treasury’s compensation is likely to be a unique event that may not happen again.
More than 11,000 LCF investors were left with £237m in losses when the mini-bond provider entered into administration in January 2019.