London Capital & Finance Plc - Case Update

Last month, we wrote about how the joint administrators of London Capital & Finance (LCF) had modified their estimated returns to secured creditors from the 25% range to 10-18% due to the valuation of certain assets and future realisation costs.

Now, the FCA has announced that it has censured the firm but has decided not to impose a financial penalty, as LCF is insolvent and in administration, and to do so “would only divert funds that the administrators may use for the benefit of bondholder creditors”. The FCA recognised that the censure “will not provide solace to those investors who lost out”, but stated that it is important to set out what went wrong and how the firm’s promotions misled people into parting with their money.

The FCA found that financial promotions used by LCF to market minibonds made them appear a far more attractive investment than they were and failed to disclose hidden charges and the high-risk and unsustainable nature of the lending being carried out by LCF.

The FCA further found that LCF used bondholders' money to fund seemingly independent comparison websites to showcase its minibonds next to safer investments, which had a lower rate of return, enticing retail investors into investing in the firm’s high-risk products.

The FCA concluded its statement by emphasising the steps it has taken since LCF’s collapse of to strengthen its regulation and oversight of potentially problematic firms, including a more stringent authorisation process and the investment of £98m to strengthen its data analytics.

The announcement can be found HERE.

Finbarr O’Connell, Adam Stephens, Colin Hardman and Henry Shinners of Evelyn Partners are the joint administrators. They have been assisted by Mishcon de Reya. Their most recent progress report can be found HERE.