Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • daniel80
    • By daniel80 22nd Oct 15, 6:31 PM
    • 230Posts
    • 48Thanks
    daniel80
    London Capital and Finance
    • #1
    • 22nd Oct 15, 6:31 PM
    London Capital and Finance 22nd Oct 15 at 6:31 PM
    Anyone had any dealing with this company. My son has 25k to invest for only 2 years as it will be a house deposit. Iv`e told him to stay away from the stock market as 2 years is not long enough. As he is not overly keen with saving accounts cash isa`s etc due to low interest rates I said what about premium bonds a gamble on winning but stake is safe only loss would be inflation. When I googled investment ideas a link came up who were called specialist investment ideas with free advice. I put in my details..I received a call about half an hour later the guy recommended the above company which was based in Mayfair. he sounded very posh. He said London Capital and Finance were offering bonds paying 8% the money being lent to various companies to a maximum of 60% of their assist. He seems more of a salesman than an advisor and wants to phone back Monday. Brochure looks ok online but something does not seem right. Anyone dealt with these.

    MSE Insert

    Check out our Where to Start Saving guide for help.
    Last edited by MSE Andrea; 01-09-2016 at 2:14 PM.
Page 5
    • bail-in
    • By bail-in 12th Jun 17, 4:58 PM
    • 19 Posts
    • 4 Thanks
    bail-in
    Ok. How about you delete your copy of my post and then I post an updated version wirh paragraphs?
    • raynair
    • By raynair 16th Jun 17, 10:34 AM
    • 2 Posts
    • 1 Thanks
    raynair
    Looking
    I looked at this investment. I called FCA and LCF are registered with them and they a further for me and found their remit as per in the registration. FCA advised me to call FSCS which I did and they confirmed that they are registered with them but the maximum which you claim back if LCF goes down is 50K per person. Since LCf is a PLC it is more dependable. Reviews about LCF on Beefo claims to be all good.
    • dunstonh
    • By dunstonh 16th Jun 17, 10:54 AM
    • 88,338 Posts
    • 53,555 Thanks
    dunstonh
    I called FCA and LCF are registered with them
    It doesn't mean the product is. Regulated companies retail things that are not regulated all the time.

    FCA advised me to call FSCS which I did and they confirmed that they are registered with them but the maximum which you claim back if LCF goes down is 50K per person.
    That is with retail investment products. It is not with unregulated direct investments.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Malthusian
    • By Malthusian 16th Jun 17, 10:56 AM
    • 2,411 Posts
    • 3,351 Thanks
    Malthusian
    I looked at this investment. I called FCA and LCF are registered with them and they a further for me and found their remit as per in the registration. FCA advised me to call FSCS which I did and they confirmed that they are registered with them but the maximum which you claim back if LCF goes down is 50K per person.
    Originally posted by raynair
    LCF offer unsecured loan notes so in the event they default you will get nothing from the FSCS.

    Since LCf is a PLC it is more dependable.
    Nonsense. Where did you get that idea?

    Reviews about LCF on Beefo claims to be all good.
    Who?
    • AnotherJoe
    • By AnotherJoe 16th Jun 17, 11:10 AM
    • 6,886 Posts
    • 7,327 Thanks
    AnotherJoe
    FCA advised me to call FSCS which I did and they confirmed that they are registered with them but the maximum which you claim back if LCF goes down is 50K per person. .
    Originally posted by raynair
    Thats if the company fails. If the bond fails you get nada
    • bowlhead99
    • By bowlhead99 16th Jun 17, 11:58 AM
    • 6,492 Posts
    • 11,471 Thanks
    bowlhead99
    Thats if the company fails. If the bond fails you get nada
    Originally posted by AnotherJoe
    Exactly; perhaps more importantly if the company does go bust you are only going to have a claim if you were provided with a regulated service , not (as dunstonh says) for unregulated activities.

    If their permissions are "credit broking" because they arrange for their money to be loaned out, that's not a regulated service you bought, that's something they did for a borrower of theirs. Its nothing to do with YOU lending THEM money.

    Where the scope of their permissions includes advising on investments, but you didn't buy any investment advice from them (ie you just lent them money), good luck claiming that they sold you unsuitable advice and getting a judgement against them that they owe you money because of the poor quality of advice, and therefore getting something back from FSCS when they go bust in place of getting it directly from them. You won't be getting anything for your mis-sale because they didn't advise you to buy. You lent them money by buying their bond.
    • Reaper
    • By Reaper 16th Jun 17, 1:46 PM
    • 6,086 Posts
    • 4,126 Thanks
    Reaper
    Reviews about LCF on Beefo claims to be all good.
    Originally posted by raynair
    Who?
    Originally posted by Malthusian
    I think they mean "Feefo", a review site apparently.

    I looked at some of the reviews but they are just based on how it was to set it up and whether the first few payments have been made. I'm not sure how many of them really understand the product when they say things like:
    "Recommended in preference to all savings accounts if you can cope with the fixed term"
    • badger09
    • By badger09 17th Jun 17, 10:50 AM
    • 5,079 Posts
    • 4,276 Thanks
    badger09
    Move over bowlhead99.

    bail-in has taken your 'longest posts' crown.

    On a more positive note, they are now legible
    • TrustyOven
    • By TrustyOven 17th Jun 17, 11:39 AM
    • 551 Posts
    • 619 Thanks
    TrustyOven
    Move over bowlhead99.

    bail-in has taken your 'longest posts' crown.

    On a more positive note, they are now legible
    Originally posted by badger09
    But it looks like a copy-paste from some other source.

    Bowlhead99's responses are not; they seem personalised and with great care, time and effort apprears to have been placed in creating them.
    Goals
    Save £12k in 2017 #016 (£2040.32 / £10k) (20.40%)
    Save £12k in 2016 #041 (£4558.28 / £6k) (75.97%)
    Save £12k in 2014 #192 (£4115.62 / £5k) (82.3%)
    • bigadaj
    • By bigadaj 17th Jun 17, 2:44 PM
    • 9,360 Posts
    • 5,981 Thanks
    bigadaj
    I've reported as spam as it's obviously an article posted from a third party source with no acknowledgement or reference, so it's effectively plagiarism.
    • bail-in
    • By bail-in 21st Jun 17, 8:09 PM
    • 19 Posts
    • 4 Thanks
    bail-in
    I've reported as spam as it's obviously an article posted from a third party source with no acknowledgement or reference, so it's effectively plagiarism.
    Originally posted by bigadaj
    Please note that this LC&F review is an original document. It has not been copied from anywhere else offline or online. It has been updated frequently from its original post here and additions made. You will have noticed this if reading it. The contributors wish to remain anonymous which is their right to do so. You have no proof to the contrary. At present a search will show this review is not posted anywhere else on the Internet. Updates may continue to be added.
    "Derivatives are weapons of financial mass destruction." Warren Buffet.
    • eskbanker
    • By eskbanker 21st Jun 17, 8:22 PM
    • 5,010 Posts
    • 4,767 Thanks
    eskbanker
    Love of God is the greatest human virtue
    Originally posted by bail-in
    Without wishing to get bogged down in a theological debate, I'd argue that love of one's fellow humans is somewhat more admirable (see real and visible selfless acts after various recent tragedies, plus deserving recipients of honours, etc) rather than seeing worshipping sundry flavours of sky fairy as being laudable. No offence intended to believers though, each to their own and all that, but if contentious proclamations like that are going to be made they should be open to challenge, albeit this clearly isn't the place for either the assertion or the challenge....
    • AndyT678
    • By AndyT678 22nd Jun 17, 9:31 AM
    • 692 Posts
    • 921 Thanks
    AndyT678
    You will have noticed this if reading it.
    Originally posted by bail-in
    I'm pretty sure that nobody will ever read it. It is not very engaging.
    • raynair
    • By raynair 22nd Jun 17, 10:06 AM
    • 2 Posts
    • 1 Thanks
    raynair
    Still Looking
    Thank you for your in -depth explanation.WoW you sure know your stuff. As I am not that financially astute, would you/one of you call the FCA and the FSCS and enquire as to what activities they have registered for etc as you would have the right questions to ask. AS I said before i talked to them but came out convinced..
    The next company I looked at is Blackmore..any comments
    • AndyT678
    • By AndyT678 22nd Jun 17, 10:15 AM
    • 692 Posts
    • 921 Thanks
    AndyT678
    Thank you for your in -depth explanation.WoW you sure know your stuff. As I am not that financially astute, would you/one of you call the FCA and the FSCS and enquire as to what activities they have registered for etc as you would have the right questions to ask. AS I said before i talked to them but came out convinced..
    The next company I looked at is Blackmore..any comments
    Originally posted by raynair
    It's the same thing. It is NOT a savings account, it even says so on the homepage, "Capital at risk. Illiquid, non-transferable, not covered by FSCS". If you're a high net worth, sophisticated investor looking for a high risk, unregulated investment with a chance of losing all your money and with a return capped at a maximum of <10% then these are appropriate.

    If you want a savings account; go to a bank / building society.
    • Malthusian
    • By Malthusian 22nd Jun 17, 10:44 AM
    • 2,411 Posts
    • 3,351 Thanks
    Malthusian
    If you're a high net worth, sophisticated investor looking for a high risk, unregulated investment with a chance of losing all your money and with a return capped at a maximum of <10% then these are appropriate.
    Originally posted by AndyT678
    If you're a high net worth sophisticated investor happy to accept a risk of total loss, you would be looking at EIS, angel investment, offshore investments to take advantage of your jet-setting tax status, that kind of thing. Not mini-bonds flogged to the greedy and gullible via Google Adwords to take advantage of their inability to distinguish between deposit accounts and corporate bonds.
    • Malthusian
    • By Malthusian 22nd Jun 17, 10:49 AM
    • 2,411 Posts
    • 3,351 Thanks
    Malthusian
    would you/one of you call the FCA and the FSCS and enquire as to what activities they have registered for etc as you would have the right questions to ask.
    Originally posted by raynair
    No, because "what regulated activities are they registered for" is the wrong question.

    Correct questions to ask would be - what is your attitude to risk, are you prepared to risk total loss, do you have a sufficiently substantial diversified portfolio of stocks and shares that it makes sense to allocate a small percentage of your portfolio to individual corporate bonds, if the answer is yes then is this particular corporate bond the best you can do.

    AS I said before i talked to them but came out convinced..
    There's one born every minute.
    • AndyT678
    • By AndyT678 22nd Jun 17, 12:11 PM
    • 692 Posts
    • 921 Thanks
    AndyT678
    If you're a high net worth sophisticated investor happy to accept a risk of total loss, you would be looking at EIS, angel investment, offshore investments to take advantage of your jet-setting tax status, that kind of thing. Not mini-bonds flogged to the greedy and gullible via Google Adwords to take advantage of their inability to distinguish between deposit accounts and corporate bonds.
    Originally posted by Malthusian
    Fair point - poor phrasing on my part.
    • bail-in
    • By bail-in 23rd Jun 17, 5:26 PM
    • 19 Posts
    • 4 Thanks
    bail-in
    London capital and finance minibond review part 1
    http://forums.moneysavingexpert.com/showthread.php?p=72739908#99

    NOTE: THIS REVIEW IS AN ORIGINAL DOCUMENT AUTHORED AND POSTED BY BAIL-IN AND MSE HAVE GIVEN PERMISSION TO POST HERE

    LONDON CAPITAL AND FINANCE MINI-BOND REVIEW PART 1

    London Capital and Finance (LC&F) Plc www.londoncapitalandfinance.co.uk describes itself as a successful and expanding commercial lender and corporate financier, lending to small and medium business enterprises (smes). According to the company information site Endole, the purpose of LC&F is the provision of raising funding through the issuance of private bonds. The direct issue of the LC&F investment mini-bond is intended to raise income to finance business lending activity. Details of the unregulated mini-bond certificate of debt offer are not presented here in the review. Visit the LC&F website for info about the up to 8% APR fixed rates interest 1-3 year term LC&F mini-bond investment security.

    The LC&F Bond Prospectus for the debt security or loan note is available online: Malta Financial Services Authority (MFSA) Bond Prospectus £100,000,000 Secured Bond Issuance Programme London Capital and Finance (20161018_Final_Base_Prospectus2.pdf
    Download from https://www.mfsa.com.mt). Issuer: London Capital and Finance Plc, Tunbridge Wells, TN39JS. Tel 08452186918. UK Companies House no. 08140312. Financial Conduct Authority (FCA) no. 722603.

    LC&F is an FCA authorised and regulated firm within the UK. As of 7/6/2016 the firm has permissions to provide regulated products and services e.g. accepting deposits, providing credit to consumers, giving investment advice, arranging deals in investments. The firm cannot hold client money. It is able to control client money for corporate finance business only. LC&F can lend monies directly without FCA permission if each loan amount is over £25,000. A financial company without relevant FCA permissions may also engage in such financial activity by selecting an appointed firm with such FCA approval and permissions e.g. for lending. The FCA authorised company contracted by LC&F at time of launch to ensure FCA compliance of the bond information memorandum was appointed in this way.

    For company and financial information about LC&F Plc and the directors visit the following UK websites:
    www.companieshouse.co.uk
    www.duedil.co.uk
    www.endole.co.uk
    www.companycheck.co.uk
    www.bizdb.co.uk
    These websites provide accounts and returns information, officers, address, current liabilities, current assets, net assets, cash, turnover, and more for UK companies registered at Companies House.

    The well designed LC&F website and well-staffed mini-bond marketing and financial team are mostly about the direct marketing of the corporate minibond and the prospectus. You will find little about LC&F loan business operations on the website. Little about the company track record and means of interest payment to the bondholders, and capital repayment. As with other online mini-bond offers, the website is about marketing the mini-bond, not the loan business side and practical discharge of financial obligations to investors. Even all the customer reviews are from bondholders, not one review from a business loan borrower. There is no LC&F commercial lending website.

    Financial regulatory requirements are less stringent for unregulated mini-bonds than for listed corporate bonds. Great for the firms issuing them as it saves on paperwork and reduces the problems of dealing with banks and other financial institutions. In the case of a UK stockmarket traded corporate bond the detailed prospectus, with FCA mandatory requirements, for the corporate bond and the bond issuer are legally and financially scrutinised before for a LSE listing. In contrast, mini-bond issuers do not have to provide a detailed, legally, financially, independently scrutinised prospectus for the company itself, nor a prospectus following FCA regulations. However, any financial promotions, including public offers must be approved by a FCA authorised person, who must approve the invitation document and all related promotional material as financial promotions.

    Unlike a UK exchange (LSE) listed bond, an unregulated mini bond issuer is only required to provide a prospectus or financial promotion document for the offer following FCA rules for the publication, the type and description of the financial product, and that the retail investor is appropriately certified, that is, a sophiscated, high net worth, restricted or advised investor. (For more info about mini bonds as instruments of investment see: Being part of the crowd: mini-bonds and crowdfunding for franchise growth - Lexology www.lexology.com).

    In practice what is important here is, unlike a UK stockmarket traded corporate bond, the mini bond issuing company is not required to prove, only state, in the bond prospectus what they claim to be doing as a business in order to fulfill their financial obligations under the bond issue, such as term interest payment. This is a disclosure issue which is considered further later.

    The LC&F mini bond security is a certificate of debt or debt security, an IOU or loan note issued to raise finance or refinance. It is unregulated, unprotected, non-convertible, un-tradeable and carries a significant risk so a return on investment and return of capital is not guaranteed. As an FCA unregulated financial product, the investor has no protection against losses under the Financial Services Compensation Scheme (FSCS).

    However, the LC&F website states this unprotected investment is secured. It is asset-backed, that is secured on the assets of LC&F. The risk to investors is spelled out here in the disclaimer of liability: "The Bonds are secured by a debenture over the assets of the Company. There can be no assurance that, in the event that this security is realised, the amounts realised will be sufficient to satisfy the obligations to repay principal and accrued interest under the Bonds." (For the full LC&F disclaimer of liability visit http://londoncapitalandfinance.co.uk/disclaimer).

    To add to this, a credit reference search at the time of the minibond public launch revealed the company's liabilities cancel out most of the value of the property assets of LC&F. (For a more up to date summary of LC&F latest financials, as of 30/4/2016, visit https://www.endole.co.uk/company/08140312/london-capital-and-finance-plc).

    In addition to the mini-bond secured with a debenture charge on LC&F assets, the issuer claims the bond is secured by a fixed and floating charge on the assets of the businesses that LC&F lend the bondholders' capital. How can that in practice be called asset secured? The assets of the borrowing smes are not LC&F's assets, rather LC&F has a fixed and floating charge over them in case of loan default by the borrowing companies.

    This illiquid scenario is not good in the case of loan default and consequential insolvency administration of LC&F and the borrowing companies, especially if challenged by existing creditors of both LC&F and/or the borrowing companies. Just because it is claimed that the mini-bond is secured by assets, whether of the lender or the borrowers, it does not mean it is secured in practice. Enforcing a registered charge on assets in case of default is often difficult, expensive and time consuming, especially if many parties are involved. There is no guarantee of sale at initial valuation of the assets and it may be difficult to find buyers. This would affect the bondholder compensation for loss of interest and capital. There would be a need for skilled risk evaluation and debt recovery to help avoid such problems. (For further info on the difference between a secured and unsecured bond visit www.thebalance.com/secured-bonds-vs-unsecured-bonds-417067).

    Any monies returnable in the case of LC&F and sme borrower insolvency is dependent on the liquidation process. Bondholder investors are low in the compensation ranking order, although secured ranks higher than unsecured. Bondholders receive payments before shareholders. However, neither are paid before the company settles debts with higher ranking creditors: banks, mortgage holders and other senior creditors. We have seen there are little in the way of LC&F property assets, which are mortgaged, and the asset liquidation of defaulting loan borrowers is complicated, time consuming and expensive with administration, legal and other fees reducing value. It is highly likely the bondholders would lose most if not all of their investments if LC&F and the smes defaulted resulting in insolvency.

    There may also be problems with default in enforcing the corporate trust in favour of the bondholders to secure interest and capital return. Re the legal requirement for an independent trust created for the beneficial return of interest and end of term capital to bondholders, recent history of mini-bond failures shows such a corporate trust may not in practice prevent nor remedy corporate issuer default. The supposedly unaware independent trustees deny liability, even though their duties include monitoring and protecting the trust monies in the interest of the bondholders as beneficiaries. Prevention is better than cure. (More on corporate trusts and trustees later.)

    Turning to the viability of the LC&F business lending model. The up to 8% APR interest (coupon) on the mini-bond is declared payable to bondholders quarterly minimum to yearly maximum, depending on the bond series loan period of 1-3 years, with the capital principal repaid to bondholders at end of term. The periodic interest is declared raised from short term loan interest at 12-20% APR paid on asset secured loans to smes. Note that the lender, LC&F, will need to pay for contractors, profits, wages, promotion and marketing as well as the bondholder interest out of the sme loan interest payments.

    How viable is this business loans model in relation to meeting these financial obligations by LC&F?

    The LC&F website states it has over 4,300 investors (10/06/2017) and an increasing loan book in excess of £66m. Since 2012 LC&F has lent out over £108m, £42m in loans have been repaid since 2012 and the repaid funds have been successfully re lent to other borrowers. However, Companies House Annual Accounts indicate that LC&F has very little past experience in short term sme loans. More on this later.

    The buiness loan market is highly competitive. An online study indicates the current average small business bank loan rate is 6-13% APR from lowest to highest, much less than the business loan interest rates of 12-20% offered by LC&F. A business loan provider online comparison website indicates rates approx. 3.5-5.5% APR on secured business loans. An application with good credit standing for an unsecured one year business loan for £25,000 results in a 4.9% APR interest rate from Santander. Much less than LC&F secured business loan rates at 12-20%.

    With low interest rates on loans now and the large number of loan companies, the 12-20% lending rates by LC&F may not be competitive in the UK asset secured sme loan industry. But it is unlikely that lending rates below 12-20% would be sufficient to cover the LC&F company and mini bond marketing expenses, wages, contractor fees, and profit, as well as bond interest. No other business model is put forward by LC&F.

    A reason a business would be charged a higher loan rate of 12-20% APR is the risk of loan default is higher. Not good for LC&F bondholder interest payments, nor return of sme loan capital and bondholder principal, nor for company expenditure and profits.

    The following five factors pull the most weight in credit underwriting or loan risk evaluation: capacity, credit history, the size of the loan, collateral and conditions. These are the factors the LC&F loan team would apply to sme loan applicants. Risk evaluation and management in relation to business lending is a very skilled job, with grave consequences financially for the lending company investors if mismanaged. Both interest and capital can be lost.

    Financial regulators are concerned that such risk mismanagement is potentially a primary cause of future large scale failure in the rapidly expanding peer-to-peer lending. Lord Adair Turner, former City regulator, said in 2016: "You cannot lend money to small and medium sized enterprises without someone doing good credit underwriting." Proper checks were required to ensure a company actually possessed the premises, equipment and expertise it claimed. However, the P2PFA cites the low 2-3% loan default amongst its members, but they are the established largest P2P firms.

    There are other broader economic and financial factors affecting business loan interest rates. The UK economy is not in the best of shape. Brexit hit UK companies confidence, although there is a high demand for business loans. Defaults can occur in an economic downturn. The present financial market conditions in the UK are in some ways similar to those in the 2007-8 crisis, including very low interest rates, 0% credit card lending, very low fixed rate mortgages. The small business loan model in the UK and other countries is subject to financial mismanagement reminiscent of the high default risk in the subprime mortgage investments of the 2007-8 crisis. Small business lending falls through the regulatory cracks.

    Following the UK crisis bank business loans to smes have been hard to obtain, despite government interventions like the Bank of England's Funding for Lending Scheme. Conditions eased recently but most lenders still have strict requirements for borrowers. It was the 2007-8 banking crisis that led UK banks to withdraw small business loans. In turn leading to the birth of minibonds whereby companies could directly approach, with restrictions, the public privately for investment loans. As also happened in Greece, where mini bonds are popular as banks severely reduced lending.

    The LC&F CEO states no sme secured loan defaults as of June 2017. However, there is a high default risk with sme loans, especially if inadequate credit underwriting. Default would impact LC&F finance reducing company expenditure and profits, resulting in LC&F bond interest payment default which can trigger immediate return of all interest and capital to bondholders. If a 75% bondholder vote in favour. Another point here is outstanding loans at end of bond term may delay return of principal.

    However, to help avoid this scenario, it is possible that LC&F have contracted a competent experienced third party loan provider, with relevant FCA permissions, to provide and expertly administer the business loans. But then contractor fees need to be paid from the sme loan interest as the only source of available finance. They cannot be paid from bondholder capital the stated purpose of which is sme loans by LC&F to generate earnings.

    Turning to loan numbers. It is difficult to find out any evidence for the marketing team claim that LC&F have lent approximately £15 million to approximately 120 small and medium sized business enterprises (smes) secured on £33 million asset value since launch of the mini bond. These figures from 2016 are out of date by a few months. As of June 2017, the LC&F website states in excess of £66 million invested with over £215 million worth of sme borrowers' and LC&F’s assets held as security, along with a part of the bondholder capital. Up to that latter date LC&F state no borrowers have defaulted on the loans.

    With reference to the up to 8%, bond interest offered, LC&F are paying out due interest to bondholders. However, where is the value of interest paid if you lose all unprotected capital before or at the end of term. All capital and interest is at risk, and will continue to be so until it has been returned. The higher, but not historically high, interest rates on the minibond may not really justify the risk of loss of the entire capital investment.

    We said earlier that Companies House audited Annual Accounts reveal that LC&F have little experience of sme lending. LC&F claim on the website a 100% track record of paying out interest, between 2012 and 2017. However, this appears to be the first marketed issue of the minibond to the public. Companies House LC&F audited Annual Accounts clarify the picture. Before 2014 Annual Accounts indicate no loans of any significance were made. The Companies House audited Annual Account return 2014-15 indicated only one loan customer and the director of the lender LC&F, Michael Andrew Thomson, was also the director of the loan receiving company, One Monday now dissolved. Although bond interest payments were made 2016-17, the little activity in 2012-14 and the one loan client in 2014-15 does not really support LC&F's claim of 100% record of interest payment to investors since 2012.

    From one loan to one company in financial year end 2015 (a period when no mini bond was offered by LC&F) to 120 sme loans in financial year end 2016 (a period when a mini bond was offered by LC&F). From a few thousand pounds single loan in financial year end 2015 to £15 million plus in the financial year end 2016. An update on the website in 2017 claims excess of £66 million invested with over £215 million worth of borrowers. That is a lot of work for the directors and the two employees, as stated in 2016 Annual Account. Although it is possible that LC&F is contracting out the lending side to a third party FCA approved loan provider.

    Companies House returns by LC&F Plc are downloadable. The 2015-16 Companies House audited Annual Account return shows far greater revenue and expenditure to previous years. The 2014-15 audited Annual Account mentions one loan client, disclosed as a risk factor. There are figures in the 2015-16 audited Annual Account indicating!considerable expenditure on contractual outsourcing by LC&F. The new auditors did not disclose details. (For info re audited requirements visit https://www.rapidformations.co.uk/blog/will-my-limited-company-be-audited/). According to LC&F Annual Return in the financial year 2015-16 there were two directors and two employees. As of July 2017 four directors and two secretaries are listed at Companies House as officers of LC&F.

    Turning to the consumer interface, the public front marketing team company for the minibond marketing and financial administration. This is an outsourced contractor. However, the staff appear to act like employees of LC&F even though they have little to do with the lending business of LC&F. This gives the impression that LC&F is bigger than it really is. The contracted minibond marketing team say there are approx. 50 employees in LC&F but they are really referring to their own contracted marketing company. The LC&F Companies House Annual Account return for 2015-16 states there are two paid employees at LC&F. According to LinkedIn they are education students working in Operations.i7i

    All consumer contacts, regarding LC&F business and the minibond offer and administration, are through the contracted marketing team. It is very difficult to approach the LC&F directors or employees to find details of the lending team. The marketing company provide little information for the separate sme loan side for raising bond interest. Perhaps an external FCA approved loan contractor is used by LC&F. Perhaps the marketing team have not been briefed on the sme lending side.

    Want to speak to a company director about this? As in many companies, not easy. Even if you do, it may be unproductive. Like politicians, company directors can say meaningless statements yet sound meaningful. The marketing team will pass queries on that they cannot address, but only to senior account managers in their own team who appear unaware of details about LC&F's commercial loans business. You end up with excuses and going round in circles, without getting answers to relevant questions by potential and existing customers searching for information disclosure.

    Of course this is part and parcel of their job. As a financial marketing contractor they are there to deal directly with investment customers in relation to the administration of the bond offer by LC&F. They do not directly deal with issues relating to the LC&F company and associated officers and employees. However, it is frustrating that you end up with nobody dealing with specific and relevant concerns which could impact potential and existing investors in relation to interest payment and repayment of capital. Banks and other large financial institutions are also, if not more so, very skilled in ensuring customers can only contact retail banking and retail head office but not the head corporate office where the directors and other officers and staff are based. The FCA Handbook Principles shed more light on this, on the behavioural relations between firms and customers, existing and potential. (See APPENDIX 1.)

    Regarding the LC&F lending side to smes, the bond marketing team reveals there is a trading interface between LC&F lending team and sme borrowers, but know little about it which is strange considering! from this LC&F accounts for bondholder interest payments, company profit and expenditure including contractor fees, wages and marketing costs.

    The marketing team are unable to substantiate to potential or existing investors this LC&F and sme trading interface. Unlike other sme business loan providers, there appears to be no available company website for sme borrowers to apply for LC&F business loans. No physical location other than the registered office in Tunbridge Wells. No available names of existing sme borrowers. No names of the lending team employees. No credit underwriter name. No lending team employee contact, no phone, no email address for the lending team, no reviews by borrowers, no loan statistics. To apply for a sme loan you are asked to go through the bond marketing company team. No internet searches have provided any evidence of the sme lending, nor how the bondholder interest is being paid through sme loan interest, nor is there such evidence on the LC&F website, nor can the bond marketing team provide such when asked.

    There are many positive Feefo invited investment customer service reviews with names on the LC&F website. However, there are no Feefo reviews to be found by the many business loan customers of LC&F. In fact there are no loan statistics at all on the site, except the statement as to totals mentioned above earlier.

    This does not mean LC&F are not carrying out these commercial lending activities. This does not mean that LC&F are not paying out due interest payments to bondholders. Interest payments are paid to date. But where is the evidence where this money is coming from? The only information LC&F have provided is that it is a commercial lender to smes and the lending totals so far. Both present and future investors would like relevant information disclosure.

    The lack of transparency and disclosure have been a major cause of past minibond failures as the lack of checks allows the steps to failure. Besides lack of verification of the LC&F commercial lending business, bondholders do not appear to be able to check what the bondholder capital is actually used for, to verify it is used for stated purpose. The financial history of recent mini bond failures (Providence Financial, Secured Energy Bonds) shows that the loan capital is often not used for stated purpose, which can cause failure. Past mini bond failures indicate bond issuers and trustees of corporate trusts set up to protect the investor interests have fallen short in performance of duties.

    As suggested elsewhere here, perhaps a competent external loan company with relevant FCA permissions is contracted by LC&F similarly to the minibond marketing team. However, we and customers are aware of the contracted marketing company but not of a contracted lending company. Substantial wages are being paid out to financial contractors, according to the LC&F 2015-16 Companies House Annual Account return. Presumably from the sme loan interest. It cannot come from the bondholder capital as that can only be used for stated purpose: interest returning loans to smes. Clarification and disclosure on this may help to remove doubts re validation of the LC&F business lending model to fund bond interest.

    CONTINUED IN PART 2

    http://forums.moneysavingexpert.com/showthread.php?p=72739908#100

    __________________________________________________
    Last edited by bail-in; 23-07-2017 at 8:58 AM. Reason: update
    • bail-in
    • By bail-in 23rd Jun 17, 5:48 PM
    • 19 Posts
    • 4 Thanks
    bail-in
    London capital and finance minibond review part 2
    http://forums.moneysavingexpert.com/showthread.php?p=72739908#100

    NOTE: THIS REVIEW IS AN ORIGINAL DOCUMENT AUTHORED AND POSTED BY BAIL-IN AND MSE HAVE GIVEN PERMISSION TO POST HERE

    LONDON CAPITAL AND FINANCE MINI-BOND REVIEW PART 2

    There is no implication of fraud or dishonesty here on the part of LC&F or contractors. Nor have internet searches in the past or present shown such in relation to LC&F and the company officers. Audited Annual Accounts appear in order. The company has a right to company non-disclosure, unlike companies that issue traded company or corporate bonds on the stock market. However, it is in the company and investor interest to provide evidence to prospective and present investors indicating clearly how LC&F are raising funds through a working, reliable and practical business plan to pay the interest to the bondholders. Indeed they are behoved to do this under the FCA Handbook Principles. (See APPENDIX 1).

    Investors in LC&F may well think they have a legal right to have this information available to them, to prove that the company is doing what it states it is doing, because it can impact the value of their investment. However, legally, because of the unregulated status of minibonds, the company does not have to disclose. There is no legal way to force such company disclosure, although it is clear that the FCA Handbook Principles apply here.

    The EU is in process of mini-bond financial regulation. Hopefully they will address this company non-disclosure issue. Brexit should not affect implementation in the UK of these EU regulations of mini bonds. The UK government will in all likelihood adopt them.

    Companies House searches reveal there are many other companies, related through directorship to LC&F Plc director and CEO Michael Andrew Thomson (Andy Thomson), director ID 917033053. Some appear to be profitable others not, looking at Companies House Annual Accounts. However, many are dissolved or are inactive. The website www.companycheck.co.uk states the CEO has had a total of 25 company directorships, including 2 active, 11 resigned, 12 closed. Qualifications, education and employment history of the directors, including the CEO Michael Andrew Thomson (Andy Thomson), and Operations staff are listed on LinkedIn.

    We have seen earlier the business and consumer loan industry is very competitive with the Bank of England base rate being so low, along with other market factors. Consumers and businesses can get an unsecured loan from a bank at between 3-5% APR. Rates on secured business loans can be similar. Not good for LC&F, offering business loans at 12-20%, as this is the only means of company profits and bondholder interest payments. There is also the possibility of some of the many loan contracts defaulting, although LC&F state there have been no loan defaults as of June 2017.

    However, if we go by updates on the LC&F website, we are agreed interest is being paid to date although above we have considered relevant issues of disclosure, evidence and practicality in relation to the means of earning bondholder interest payment and capital repayment, and company profit and expenditure through the LC&F lending model.

    Even if a mini bond provider pays interest on the bond, as was paid to bondholders in the recent collapsed Secured Energy Bonds (SEB), it does not ensure return of capital. In Secured Energy Bonds the Australian parent company illegally siphoned off the bondholders' capital and later declared bankruptcy. The SEB bondholders have been unable to recover invested capital. The bond security trustee (IPM) denies liability for loss of bondholder assets. Assuming assets are recovered, in the hierarchical order of asset liquidation payouts, bondholders would be low in the creditor list. Remember interest payments on due date do not mean the capital will be returned, although if they are delayed it may be a sign of impending failure. However, most schemes that fail have never defaulted.

    Another cause of LC&F failure could be running out of capital and unable to continue commercial lending. This could lead to insolvency or another round of fund raising to refinance. The auditors raised the lack of capital issue in the last Annual Account in regard to the Wellesley mini-bond. Recently the issuer Wellesley has raised refinance capital. This will always be a problem if a firm's lending to businesses comes from borrowed finances and not from its own financial assets.

    Turning to the LC&F legally required corporate trust setup to secure the beneficial interests of the bondholders. According to Wikipedia a trust is a three-party fiduciary relationship in which the first party, the trustor or settlor (the issuer in the case of a bond); transfers (settles) a property (often but not necessarily a sum of money) upon the second party, the trustee; for the benefit of the third party, the beneficiary. As another definition: a trust is a legal arrangement where one or more people or a company (called the trustees) controls money or assets (called the trust property) which they must use for the benefit of one or more people (the beneficiaries). You can put money, investments or other assets into the trust. Depending on the type of trust you use, it may have to pay tax, which may be recoverable by the bondholder, as is the case of LC&F corporate trust, and the trustees may need to complete tax returns. The corporate trustee duties include, issuing monthly statements, ensuring interest is paid and the principal returned at end of term to the beneficiaries.

    The security trustee of the corporate trust (see definition in Wikipedia), arranged by the LC&F bond issuer, the trustor or settlor, holds the bondholder capital in trust for the beneficiaries, the bondholders. A debenture charge with terms is registered with LC&F at Companies House. The corporate trustee for LC&F is Global Security Trustees (GST). The corporate trustee's role is to act in the interests of investors by being an independent supervisor of the security and a custodian of assets. The prime responsibility is that of a prudential supervisor, and not a hands-on manager. Issuers of securities to members of the public are bound by a trust deed and require a trustee by law. The trust deed document sets out the conditions for the investment. The trustee's role includes to: represent the collective interests of investors; ensure the company offering the investment complies with the trust deed; hold assets in trust separate from the scheme manager (in some cases).

    What is fine in legal terms does not necessarily mean it can be implemented in practice. How would a bondholder enforce a corporate trust in the case of non performance? How would a corporate trustee settle the trust if the capital has been misused? The bondholder only has a beneficial interest. It is the corporate or security trustee that enforces the trust in the interest of the beneficiary. This can be time consuming, costly and difficult. The corporate trustee, usually legally qualified, is paid to set up and administer the beneficial trust in favour of the bondholders. The trustee solicitor will also want payment for enforcing the beneficial trust in favour of the bondholders. Problems could go on for years in relation to mismanagement of the bondholder capital, if that happens. With mini-bond investments that have collapsed recently, the security trustees have been unable to help the investors with return of principal. Often because the trust assets have been missappropriated. Yet trustees have to be regularly informed as to the use of the trust assets, although they may not have hands on managerial rights. The rule: "if it's gone, it's gone" appears to apply here.

    Re LC&F, the corporate trust was set up by Global Security Trustees (GST), the trustee company for the beneficial trust for the bond. That is, to administrate the trust and the return of end of term capital to bondholders as beneficiaries of the trust. GST was incorporated not long before the launch of the mini-bond. A search for Global Security Trustees at Companies House reveals there is one officer, the director, and the company has no assets. At the time of the search no Annual Account had been lodged. The independent trustee, Robert Mannering Sedgwick, the director of GST, is related to Michael Andrew Thomson through directorships and through recommendations on LinkedIn.

    In the corporate trust, in relationship to the mini-bond loan, the bondholder has a beneficial interest through the trust for due term interest and the return of end of term capital, the principal, but no control over its use by the company bond issuer during the bond term. The bond loan capital could possibly be used for promotion of the bond, for paying marketing or other contractors, although the stated purpose is for short term business loans to smes in order to fund bondholder interest payments. For instance, investors who have a total of £8.15 million tied up in Providence mini-bonds are according to administrators unlikely to see their money again. Two mini-bonds, launched by a firm called Providence Financial in 2014 and 2015, attracted 825 investors at an average of £10,000 each after offering quarterly interest payments of 8.25% and 7.5%. Providence then went into administration in September 2016 showing a huge 20% value of the bonds issued was spent on launch and marketing costs. The security trustee (IPM) accepts no blame or liability in the bondholders' losses. Remember: "if it's gone, it's gone."

    Be warned. Even though the growing mini-bond investments have incentive driven higher than average bond yields, comparing bond market yields, they are not high enough from a historical comparison to risk all the investor's capital. Interest on traded retail and corporate bonds and bond funds on the London Stock Exchange (LSE) is low under present market conditions yet investors are also risking the capital. It is not acceptable that bond fund managers offer dismal returns expecting investors to risk all their capital. However, retail and corporate bonds, unlike mini-bonds, can be traded within the loan period up to end of term. With minibonds you have to hold them full term, although it is likely in the future, as in Greece,!they will be traded. Mini-bonds are untransferable and cannot be redeemed unless the issuer defaults, as in missing due interest payments.

    Mini-bonds are unregulated and have a greater capacity to fail and to attract smaller high risk companies and sometimes people who think they can make money returns at the expense of others leading to financial abuse. However, all financial instruments regulated or not, subject to legal and financial scrutiny or not, are subject to fraud, incompetence and other causes of market failure. Many private investors have invested in startup company lPO shares, listed on the LSE, that had well known top company directors' names as advisors but who did nothing so nothing happened. Such share offerings should never have seen the light of day. Well, the destiny of every company is to either go bust or be taken over.

    Many experienced investors and financial advisors doubt the genuineness of unregulated minibond offers because, like tooth cavity amalgam fillings, they are somewhat designed to fail, at least until EU and UK regulation comes into force. It is not in their favour that they tend to be used by start-ups and often by highly speculative businesses. They are often not well-capitalised nor profitable. So if you are considering investing in a mini-bond look in the company for the opposites to those disadvantages. Some have failed already, more will follow. Having said that some minibond offers have been successful. But they have been offered by respected and popular companies, such as the John Lewis £50 million minibond, with good track records and involving their customers in the business thereby trading on loyalty.

    Transparency, openness, disclosure, good communication,!are important factors in determining success and preventing financial abuse. Potential investors should be able to access information which allows them to perform a Fundamental Analysis: a method of evaluating investments by studying a company’s earnings, growth rate, or other data related to. It is important to address concerns raised by potential and existing investors, something many mini-bond issuers including LC&F fall short of. (See FCA Principles in APPENDIX 1.)

    Always look at the business track record. It helps, but not always. Always manage your risk exposure. There is rarely a sure thing in financial investments. Get independent financial advice, if needed. Try to perceive the reasons why some are successful for investors and others not. It is easier to hide mismanagement in small firms which have few employees who are involved, but not always the case. You are more likely to find a whistleblower in a larger company with greater employee numbers. Sometimes struggling companies are taken over by unscrupulous predator companies and then the employee pension funds get raided, for example. A deceased newspaper magnate was infamously reputed for doing that. Look on the FCA website for their blacklist of companies. Investors are advised to do their homework and if you cannot get satisfactory answers to relevant questions about the financial company and business activity, that is a strong indication to walk away. This is especially the case if directors of the issuing company will not provide evidence of the business means to fulfill the mini bond terms in relation to the bondholders, including interest payments.

    Mini-bonds are not suitable for savers or mainstream investors. They are highly risky and according to FCA rules should only be offered to certified investors. These include sophisticated investors, high net worth investors, restricted investors or advised investors, as defined by the FCA, who can afford to lose investment capital. The rule is to not risk more than 5-10% of your portfolio in such unregulated investments, assuming you are an FCA certified investor. Nor should mini-bonds be classed as preferred investments for such certified investors. Mini bond offers do follow FCA rules on financial promotions regarding this. Yet mini bond issuers and marketing teams wrap up their loan offers in retail marketing packages, directly offering them to consumer markets through websites and the press.

    Problem is ordinary bank and building society savers, inexperienced investors, are attracted by the savings-like retail marketing packages and the higher interest rates, mistakingly thinking the FCA regulation is a sign of approval of the mini-bond. Such savers are looking hard for alternatives to the very low interest rates offered to them by High Street banks and building societies. But often these much higher bond rates may be offered, along with asset security, as an incentive to invest, irrespective of the market realities, because the issuer may have little in the way of investment attracting attributes such as no track record, reputation or capital. In the MFSA LC&F Bond Prospectus the issuer admits the initial 8.5% APR interest coupon for the Series 2 Bond was over optimistic for the market and it was offered by the issuer primarily as an incentive to invest. Perhaps the issuer is also over optimistic about the earnings potential of the 12-20% sme lending rates.

    However, do not think that your low risk High Street bank savings account is safe. It is not. The last few years of the 2007-8 financial crisis illustrates this with the transposition and implementation in the UK, and internationally, of the Bank Recovery and Resolution Directive (BRRD) by the Banking Acts 2009 to 2016 (1/1/2016). To help avoid a state bail-out of a failing bank, now all of your savings deposits may legally be confiscated, converted into bank equity, a bail-in, by the UK Bank of England Prudential Resolution Authority (PRA). Not just shareholders but depositors as unsecured creditors will be bailed-in. Savings deposit accounts will be converted to equity, share accounts, in the bank company and the value will be used to recapitalise the bank and pay off the bank's liabilities. Possibly FSCS protected deposits to insured value could be included, although at present they are excluded. For more on this see thread post "BRRD, BofE, bank failure resolution, bail-in rule, FSCS, and bank savings deposits" in moneysavingexpert.com Savings and Investments forum. There are many online sites, including government, and press articles re the BRRD rules, including the toolkit bail-in rule.

    The This is Money website has a handy checklist on what you need to know before buying mini-bonds, corporate and retail bonds:
    - Any investor buying individual shares or bonds would be wise to learn the basics of reading a balance sheet.
    - When looking at bonds, research all recent reports and accounts from the issuer thoroughly. You can find official stock market announcements including company results on This is Money website.
    - Check the cash flow is healthy and consistent. Also look at the interest cover ratio, the ratio which shows how easily a firm will be able to meet interest repayments on its debt. This is calculated by dividing earnings before interest and taxes (known as EBIT) by what it spends on paying interest. See This is Money guide to doing investment sums like this.
    - It is very important to find out what the bond debt is secured against, and where you would stand in the queue of creditors if the issuer went bust. This should be included in the details of the bond offer but contact the issuer direct if it is unclear.
    - Consider whether to spread your risk by buying a bond fund, rather than tying up your money with just one company or organisation.
    - Inexperienced investors who are unsure about how retail or mini-bonds bonds work or their potential tax liabilities should seek independent financial advice.
    - If the interest rate is what attracts you to the bond, weigh up whether it is truly worth the risk involved. Generally speaking, the higher the rate on offer, the higher the risk.
    - If the issuer is a listed company, before you decide whether to buy it is worth checking the dividend yield on the shares to see how it compares with the return on the bond. Share prices, charts and dividend yields can be found on This Is Money.
    - Investors should bear in mind that it can be harder to judge the risk involved in investing in some bonds than in others. It is easier to assess the likelihood of Tesco going bust than smaller and more specialist businesses. For the complete article visit: www.thisismoney.co.uk/money/guides/article-1714423/Corporate-bonds-A-guide-investing.html

    The writers of this review hope that the LC&F mini-bond is a genuine investment offer and all the investors receive their dues including 100% of their capital principal at end of term, and that LC&F is able to continue to offer successful investments in the financial markets.

    ____________

    APPENDIX 1

    The Financial Conduct Authority (FCA), along with the Financial Ombudsmam, are responsible for the regulation of authorised companies in relation to consumers. They are unable to help in a financial loss case with an unregulated financial product, such as a mini-bond, only a regulated product. The FCA has published principles of conduct which apply to all FCA regulated companies. These can aid you in your communications with investment providers. These principles are laid out in the FCA Handbook, available online, as follows:

    The Principles

    1 Integrity

    A firm must conduct its business with integrity.

    2 Skill, care and diligence

    A firm must conduct its business with due skill, care and diligence.

    3 Management and control

    A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

    4 Financial prudence

    A firm must maintain adequate financial resources.

    5 Market conduct

    A firm must observe proper standards of market conduct.

    6 Customers' interests

    A firm must pay due regard to the interests of its customers and treat them fairly.

    7 Communications with clients

    A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

    8 Conflicts of interest

    A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.

    9 Customers: relationships of trust

    A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

    10 Clients' assets

    A firm must arrange adequate protection for clients' assets when it is responsible for them.

    11 Relations with regulators

    A firm must deal with its regulators in an open and cooperative way, and must disclose to the appropriate regulator appropriately anything relating to the firm of which that regulator would reasonably expect notice.

    (Note: check FCA website for updates to Principles.)
    _____________________

    REVIEW EDITOR NOTE
    [The Review of London Capital and Finance, Plc mini-bond investment results from requests from interested potential and existing investors. The Review is financially independent. No authors of the Review have any financial connection with any of the organisations, companies, directors and officers named in the Review. Financiars, lawyers, authors, writers, researchers, regulators and private investors have contributed to the Review without payment or charge. If LC&F Plc fulfils its financial investor obligations to the bondholders in the LC&F mini-bond issue, which the Review refers to, then the content of the Review will be edited to reflect this. If LC&F Plc do not do so, then the content of the Review will be edited to reflect this.]

    http://forums.moneysavingexpert.com/showthread.php?p=72739908

    Back to Part 1
    http://forums.moneysavingexpert.com/showthread.php?p=72739908#99
    Last edited by bail-in; 23-07-2017 at 9:00 AM. Reason: update
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

2,675Posts Today

8,182Users online

Martin's Twitter
  • Byebye! I'm about to stop work & twitter, to instead spend glorious time with Mrs & mini MSE. Wishing u a lovely summer. See u in 10 days.

  • WARNING Did you start Uni in or after 2012? The interest's rising to 6.1%; yet it doesnt work like you think. See https://t.co/IQ8f0Vyetu RT

  • RT @JanaBeee: @MartinSLewis Boris is the anomaly (coffee), the others are versions of normal (beer). Lots of same candidates = vote share d?

  • Follow Martin