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    • daniel80
    • By daniel80 22nd Oct 15, 6:31 PM
    • 230Posts
    • 48Thanks
    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

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    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
    • 11 Posts
    • 3 Thanks
    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
    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
    • 88,167 Posts
    • 53,388 Thanks
    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
    • 2,214 Posts
    • 3,077 Thanks
    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.
    • AnotherJoe
    • By AnotherJoe 16th Jun 17, 11:10 AM
    • 6,550 Posts
    • 6,979 Thanks
    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
    • 6,415 Posts
    • 11,356 Thanks
    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
    • 6,061 Posts
    • 4,097 Thanks
    Reviews about LCF on Beefo claims to be all good.
    Originally posted by raynair
    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
    • 4,980 Posts
    • 4,178 Thanks
    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
    • 536 Posts
    • 611 Thanks
    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.
    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
    • 9,161 Posts
    • 5,856 Thanks
    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
    • 11 Posts
    • 3 Thanks
    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.
    Love of God is the greatest human virtue
    • eskbanker
    • By eskbanker 21st Jun 17, 8:22 PM
    • 4,800 Posts
    • 4,529 Thanks
    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
    • 671 Posts
    • 890 Thanks
    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
    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
    • 671 Posts
    • 890 Thanks
    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
    • 2,214 Posts
    • 3,077 Thanks
    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
    • 2,214 Posts
    • 3,077 Thanks
    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
    • 671 Posts
    • 890 Thanks
    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
    • 11 Posts
    • 3 Thanks
    London capital and finance minibond review part 1


    London Capital and Finance (LC&F) Plc describes itself on the website as a successful and expanding commercial lender and corporate financier. The public direct issue of the LC&F unsecured retail minibond is intended to raise income to further this activity. Details of the unregulated minibond loan note offer are not presented here in the review. Visit the LC&F website for information about the up to 8% per annum interest 1-3 year term LC&F minibond security.

    The well designed website along with the well-staffed and competent minibond marketing and financial team is mostly about the public direct marketing of the corporate minibond and the prospectus. You will find little about LC&F business operations and activities on the website, other than that they are a commercial lender or corporate financier. Little detail about the company track record and how it is raising and paying the interest to the bondholders, and repaying end of term principal capital. These are the most important aspects from the bondholder investor point of view. The website is all about marketing the minibond, not about the loan business side of LC&F and its practical discharge of its responsibility for fulfilling the financial obligations to investors.

    In the case of a stock market traded retail bond the detailed prospectus, with FCA mandatory requirements, for the corporate bond and the bond issuer are legally and financially scrutinised before being approved for a stockmarket listing. In the case of the non-traded direct LC&F minibond the company is not required to do this. The company do not have to provide a detailed, legal, financial, 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.

    The LC&F company only have to provide a prospectus or financial promotion document for the minibond offer following FCA rules for the prospectus publication, the type and description of the financial product, and that the retail investor is appropriately certified. (For more background about minibonds as instruments of investment see APPENDIX 1.)

    In practice what is important here is, unlike a traded bond, the minibond provider company do not have to substantiate what they claim to be doing as a business in order to fulfill their financial obligations, such as payment of bondholder interest under the minibond loan.

    The LC&F minibond security is a loan note, unsecured not secured. This is stated in the LC&F website. It is an unregulated investment and the investor has no protection against losses under the Financial Services Compensation Scheme (FSCS). All bondholder monies including interest and capital are unsecured and unprotected. All investment monies in the minibond loan including interest and all capital may not be returned to the bondholders.

    However, the LC&F company states on the website that this unsecured investment is secured, which appears to be a contradiction in terms. It is secured on the assets of LC&F. Besides the fact that the minibond investment is by nature unsecured, investors are not parties to the security contract and therefore cannot legally enforce it. In addition, 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 assets re the LC&F site's claim the investment is secured on LC&F assets.

    The up to 8 percent interest on the minibond investment is declared payable quarterly minimum to yearly maximum depending on the series loan period of 1-3 years. It is raised from short term loan interest at 12 to 20 percent annual interest paid on asset secured loans to small and medium sized business enterprises (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 interest payments payable by the borrower on the SME loan.

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

    The LC&F website states it currently has over 4,300 investors (at 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.

    Companies House Annual Accounts indicate that LC&F has very little past experience in short term SME loans. More on this later. The terms would have to be very short term in order to pay the 1-3 year monthly bondholder interest payments on time, and return capital so it can be re lent, and repay end of term capital on time. The loan market is a highly competitive one. One online study indicates the current average small business bank loan rate is between 6 and 13 percent per annum, from lowest to highest, much less than the loan interest rates offered by LC&F. A business loan provider online comparison website indicates rates approximately between 3.5 to 5.5 percent APR on secured business loans. An application online now with Santander by an applicant with good credit standing for an unsecured one year business loan for £25,000 results in a 4.9% APR interest rate. Much less than LC&F secured business loan rates at 12-20 percent.

    With such low interest rates on loans now and the large number of loan companies, it is a very competitive market. The 12%-20% lending rates applied by LC&F to SME loans may not be competitive enough in the UK asset secured loan industry. But it is unlikely that lending rates rates below 12% would be sufficient to cover the company and minibond marketing expenses, wages, contractor fees, and profit, as well as interest payments to bondholders. No other business model has been put forward by LC&F to pay bondholder interest.

    A reason a SME business would be required to pay a higher rate of 12-20 % APR is because the level of risk of loan default by the borrower is higher. That higher risk would not bode well for the LC&F bondholder interest payments, nor for return of the SME loan capital and bondholder principal at end of term, nor for company expenditure and profits.

    The following five factors pull the biggest weight in loan insurance underwriting, that is risk evaluation: capacity, credit history, the size of the loan, collateral and conditions. There are other broader economic and financial factors which affect the loan interest rate. Business confidence is low currently. The UK economy is not in the best of shape. Indeed the United Kingdom is increasingly showing the first two signs of sovereign default, firstly an inability to fulfil its social obligations and secondly an inability to fulfil its healthcare obligations. The level of government, business and consumer debt in the UK is staggering, worse than other EU countries that have been forced into bail-outs. The only reason the UK has never had to request a bail-out from the EU, like Greece and other members, is because the UK is not part of the European Monetary Union and therefore is not bound by the Euro currency regulations.

    The business loan model embraced in the UK and many other countries is subject to financial mismanagement reminiscent of the high default risk in the subprime investments of the 2007-8 financial investment and banking crisis. Defaults can occur in an economic downturn. Following the financial crisis of 2007-08 business loans have been hard to obtain in the UK, despite government interventions, like the Bank of England's Funding for Lending Scheme. Conditions have eased recently but most lenders still have strict requirements for borrowers. The present financial market conditions in the UK are in many ways similar to those in the 2007-8 crisis, including very low interest rates, 0% credit card lending, very low fixed rate mortgages.

    There is a high risk of default with SME loan payments, and therefore cosequentially, a high risk of LC&F nonpayment of bondholder interest and reduced company expenditure and profits. Another point here is outstanding loans at end of term may delay return of principal, the bondholder capital.

    If the company has to liquidate assets in the case of loan defaults, bondholders receive payments before shareholders. However, neither are paid before the company settles debts with banks, mortgage holders and other creditors. As we have seen earlier, the non-loan existing assets of LC&F are not available to bondholders as they are accounted for by existing liabilities, e.g. mortgage.

    Sorting out disposal of secured assets in the event of business loan default and converting them to liquid assets is time consuming and costly; certainly for a small company like LC&F. There is no guarantee that they can be sold at their initial valuation and it may be difficult to find a buyer. This could affect the bondholder interest payments and perhaps end of term return of bondholder capital, as well as affecting the running costs of the LC&F company. However, it is possible that LC&F have contracted a competent experienced third party loan provider, with relevant FCA permissions, to provide and adminster the business loans. This would help to avoid such defaults and associated problems. But then contractor fees will have to be paid from the SME loan interest. This expenditure cannot be paid from the bondholder capital.

    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 public launch of the minibond. These figures from 2016 are out of date by a few months. As of June 2017, LC&F claim in excess of £66 million has been invested with over £215 million worth of 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 three tier, up to 8%, bond interest offered, London Capital and Finance do appear to be paying out due interest to bondholders. However, where is the value of having your interest paid if you lose all your unsecured capital before or at the end of term. Although the interest rates on the minibond are attractively higher than market rates, they are not as high as historical interest rates on unsecured bonds. All of the capital is at risk, and will continue to be so until the day it is returned at the end of the bond term. Payment of interest is also at risk. 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 public issue of the minibond. Companies House LC&F audited Annual Accounts clarify the picture. Before 2014 it appears from the Annual Accounts that no loans of any significance were made. The Companies House audited Annual Account return 2014-15 indicated only one loan customer paying interest on the loan, and the director of the lender LC&F, Michael Andrew Thomson, was also the director of the loan receiving company, One Monday limited now dissolved. One loan client for that year does not really support the statement by LC&F that there has been a 100% record of interest payment to investors since 2012.

    From one loan to one company in financial year ending 2015 (a period when no minibond was publicly offered by LC&F) to 120 SME loans in financial year ending 2016 (a period when a minibond was publicly offered by LC&F). From a few thousand pounds single loan in financial year ending 2015 to 15 million pounds plus in the financial year ending 2016. An update in 2017 claims excess of £66 million invested with over £215 million worth of borrowers. That is a lot of work for the only two employees of LC&F. However, in the light of the small number of LC&F employees, two, as indicated in the Companies House Annual Account return ending 2016, it is possible that LC&F is contracting out the lending side to an external or third party loan provider with relevant FCA regulation and permissions.

    The consumer interface, the public front marketing team company for the minibond marketing and financial administration, is a separate company to the LC&F company, an outsourced contractor. However they appear to act like they are employees of LC&F rather than contractors, even though they appear to have little to do with the SME loans business of LC&F. This gives the impression that the LC&F company is bigger than it really is. The contracted minibond marketing team say there are approximately 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 employees at LC&F.

    All public consumer contacts, regarding LC&F business and the minibond offer and administration are through the front of house marketing team. It is very difficult to get by them to the LC&F directors or employees to find details of the SMEs lending team responsible for marketing the short term secured business loans. The minibond marketing company are able to provide little information for the separate SME loan side for raising interest for minibond repayments to bondholders. 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 the company director about this? As in most companies, not so easy. Even if you do, it may be unproductive. Like politicians, company directors can say a lot of meaningless statements yet it sounds meaningful. A former Australian prime minister had great skill in this. He could talk politics for an hour and not say anything of real value. Sometimes we think the writers of company reviews may have learnt a lot from him. Perhaps also financial marketing teams. The marketing team will pass queries on that they cannot address, but only to senior account managers in their own team who do not know 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 investors.

    Of course this is part and parcel of their job. As a financial marketing contractor they are there to deal directly with the public in relation to the administration of the bond offer of the LC&F company. 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 minibond investors in relation to their payment of interest 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 admin office team of the bank where the directors and other officers and staff are based. The FCA Handbook Principles shed more light on this, on the behavioral relations between firms and customers, existing and potential. (See APPENDIX 2.)

    Regarding the LC&F lending side to SMEs, communication with the bond marketing team reveals there is a trading interface between LC&F and SME business loan borrowers. From this LC&F accounts for bondholder interest payments, company profit and expenditure including contractor fees, wages, marketing costs. However, the team do not appear able to substantiate this to potential or existing investors. Unlike other SME business loan providers, there appears to be no available company website interface for LC&F potential borrowers to apply for business loans, no physical location or premises other than the Companies House registered office in Tunbridge Wells. No lending team employee contact, no phone, no email address for the lending team. To apply for a SME loan you are asked to go through the bond marketing company team which is unusual. No internet searches have provided any evidence of 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.

    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. They are honouring interest payments to date. But where is the evidence where this money is coming from? Both potential and existing customers would like to see such evidence. This very point, this lack of transparency, has been a major cause of minibond failures as the lack of checks allows the steps to failure to take place. Bondholders do not appear to be able to access and check accounts as to what the bondholder capital is actually used for. The financial history of bond failures shows that the loan capital is often not used for stated purpose, which of course will precipitate collapse.

    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. Substantial wages are being paid out to financial contractors, according to the 2015-16 Companies House Annual Account return for LC&F. Where is that money to pay contractors coming from? 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. But if this is the case that external contractors are used for the lending side why not say so when asked how the lending side works? The impression given is that the lending team are employees of LC&F, of which there are only two in year ending 2016. Clarification on this may help to remove the highlighted doubts surrounding the LC&F business lending model to fund bondholder interest.

    Last edited by bail-in; 24-06-2017 at 1:07 AM. Reason: update
    Love of God is the greatest human virtue
    • bail-in
    • By bail-in 23rd Jun 17, 5:48 PM
    • 11 Posts
    • 3 Thanks
    London capital and finance minibond review part 2


    Of course, all this may fuel doubts regarding bondholder interest being paid, and also the return of bond loan capital principal at end of term. However, as pointed out above, there may be other methods of business lending being used which the company does not wish to disclose, in relation to outsourcing for example.

    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. They have 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 and substantively 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 2).

    Investors may well think they have a legal right to know this information, to prove that the company is doing what it states its doing, because it can impact the value of their investment. However, legally, because of the unregulated status and nature of minibonds, they do not, and 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 clearly apply here.

    The EU is in the process of financial regulation of minibonds, hopefully they will address this company non-disclosure issue. Brexit should not affect implemenation in the UK of these EU regulations of minibonds. The UK government will in all likelihood adopt them.

    Companies House searches reveal there are many other companies, approximately fourteen, related through directorship to LC&F director and CEO Michael Andrew Thomson (Andy Thomson). Some appear to be quite profitable, eg. Lakeview, looking at Companies House Annual Accounts. However many are dissolved or are inactive according to Companies House records. Qualifications, education and employment history of the directors, including the CEO Michael Andrew Thomson (Andy Thomson), are listed on LinkedIn.

    The detailed 2015-16 Companies House audited Annual Account return by LC&F shows much improved financial revenue for that year. A financial performance which is much better by far than the 2014-15 Companies House Annual Account. The 2014-15 Annual Account mentioned the one loan client, which the auditors (PWC) felt needed to be disclosed as the company was the only loan client of LC&F. In the 2015-16 Annual Account there is no mention of the company loan borrowers, not that the company is obliged to disclose such. According to Companies House, in the 2015-16 Annual Return, there are two directors and two employees. One of the original three directors had resigned. As of July 2017 four directors are listed at Companies House as officers of LC&F. There are figures in the return indicating considerable expenditure on contractual outsourcing by LC&F, but no information as to identity which LC&F is not required to disclose in the Annual Account nor in the Annual Return.

    LC&F is registered as a mortgage broker, not a lender, with the UK financial regulator the Financial Conduct Authority (FCA). So how can they lend monies directly themselves if they have no FCA permissions to do so? However, if each loan amount is over a certain fixed sum a company can lend without FCA permissions. A financial company may also be able to do this by piggy-backing, as it is termed, on other loan companies that have such FCA approval and permissions for lending. The FCA authorised company contracted to ensure FCA compliance of the prospectus and financial instrument worked for LC&F in this way.

    As earlier pointed out, the business and consumer loan industry is very competitive today with the Bank of England base rate being so low, along with other market factors. Consumers can get an unsecured loan from a bank at between 3 and 5% per annum. Rates on secured business loans on business or personal assets, such as a home, can be similar as we have seen earlier. The Which? magazine and the Internet has guides on loan offers and comparison rates of interests on loans.

    Loan interest appears to be at its lowest level. There is intense competition in the business loan industry and that means it is a difficult market and harder to make loans at higher rates of interest. Not good for LC&F, if this is the only means of commitment to fulfilment of bondholder interest payments. Loan contracts default, although the minibond marketing team says they have had no loan defaults up to June 2017.

    We are agreed, interest is being paid to date, but above we have considered relevant issues of disclosure and evidence in relation to the means of bondholder interest payment. As well as to the means of achieving company profit and expenditure.

    Even if a minibond provider does pay interest on the bond, as was paid to bondholders in the recent collapsed Secured Energy Bonds, it does not ensure return of capital. In Secured Energy Bonds the Australian parent company illegally siphoned off the bondholders' capital and declared bankrupty. The SEB bondholders have been unable to recover to date their invested capital. Remember, the bondholder 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.

    The beneficial trusts set up by minibond providers which state that the bondholder capital is held in trust for the beneficiary, the bondholders, are also under scrutiny for their efficacy. What is fine in legal terms does not necessarily mean it can be implemented in practice. How would a bondholder enforce this beneficial trust in the case of non performance? He only has a beneficial interest. It is the trustee that enforces the trust in the interest of the beneficiary. This can be time consuming, costly and difficult. The trustee, usually legally qualified, is paid by the company to set the equitable trust up and administer the trust in favour of the beneficiary or beneficiaries, here 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 minibond investments that have collapsed recently, the trustees have been unable to help the investors. The rule "if it's gone then it's gone" appears to apply here.

    Global Security Trustees (GST) the trustee company for the beneficial trust for the bond, for the return of end of term capital to bondholders as beneficiaries, was incorporated not long before the launch of the minibond. A search at Companies House Annual Return states there is one officer, the director, a solicitor, and the company has no assets. At the time of the search no Annual Accounts were lodged, The director is related to Michael Andrew Thomson through directorships of past limited companies. In contradiction to the LC&F statement on the website that GST has 80 years experience with trusts, this appears not to be the case according to the Companies House incorporation details for GST. However, it may be the case that the trustee solicitor, the director of GST, works with a legal company that has 80 years experience with trust law.

    In relationship to the minibond loan, the bondholder has an equitable beneficial interest through the trust for the return of the capital, but no control over its use by the company bond issuer during the bond term. The bond loan capital could possibly be used 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 a case example, investors who have a total of £8.15 million tied up in Providence mini-bonds are 'highly 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 per cent and 7.5 per cent. Providence then went into administration in September 2016 showing a huge 20 percent of the value of the bonds issued was spent on launch and marketing costs. Remember: "if it's gone then it's gone."

    Be warned. Even though the LC&F minibond has 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 stockmarket traded bonds on the London Stock Exchange (LSE) is usually presently low and you are also risking your capital, but these company or corporate bonds, unlike minibonds, can be traded within the loan period up to end of term. With minibonds you have to hold them full term. In addition the company finances, business and bond issue prospectus are highly scrutinised by legal and financial professionals before launching on the LSE. Minibonds are not subject to this level of scrutiny and thus they have a greater capacity to fail and to attract smaller companies and sometimes people who think they can make money returns at the expense of others.

    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, on the London Stock Exchange (LSE), that had well known top company directors' names attached to them as advisors but who did nothing so nothing happened. Such share offerings have only one direction, south, and 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 have doubts about 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. 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 firm. Transparency and openness are important factors in determining success.

    Minibonds are not suitable for savers or mainstream investors. They are highly risky and according to FCA rules should only be offered to sophisticated, high net worth investors who can afford to lose all their investment capital. Minibond offers do follow FCA rules on financial promotions regarding this. Yet minibond issuers wrap up their offers in retail marketing packages, offering them to consumer markets through websites. The rule is do not risk more than five to ten percent of your portfolio in such unsecured investments.

    Problem is ordinary bank savers, inexperienced investors, are attracted by the retail marketing packages and the higher interest rates, mistakingly thinking the FCA regulation is a sign of approval of the minibond. Such savers are looking hard for alternatives to the very low interest rates offered to them by High Street banks and building societies. The tabloids love to publish articles on Joe the pensioner losing all his money in some money scam. Unfortunately, mud sticks and the whole financial industry gets tarnished, even a whole country. Not good for the UK financial industry. For example, in the UK telephone experience of scam calls, many people in the UK now think of Nigeria as a nation of scammers. Not good for that country's reputation in the world.

    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 implementation in the UK of the Bank Recovery and Resolution Directive (BRRD) by the Banking Act 2016 (1/1/2016). Now all of your savings deposits can legally be confiscated, a bail-in, if the bank is failing. Not just shareholders, but depositors as unsecured creditors will be affected. The deposit accounts will be converted to share accounts, in the bank company and the value will be used to recapitalise the bank and pay off the bank's liabilities. For more on this see thread post "BRRD, BofE, bank failure resolution, bail-in rule, FSCS, and bank savings deposits" inmoneysavingexpert.comSavings and Investments forum.

    Always look at the business track record. It helps, but not always. 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 a very small number of 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 cannot avoid being 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. There are small sharks and big sharks, small fish and big fish, small ponds and big ponds. 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, that is a strong indication to walk away.

    The This is Money website has a handy checklist on what you need to know before buying mini-bonds or 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, 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 see 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.

    The writers of this review hope that the LC&F minibond 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.

    The Financial Conduct Authority (FCA), along with the Financial Ombudsmam, are responsible for the regulation of authorised companies in relation to consumers. However they would not be able to help in a financial loss case with an unregulated financial product, such as a monibond, only a regulated product. The FCA has published principles of conduct which apply to all FCA regulated companies. They are stipulated in the FCA Handbook available online. (See APPENDIX 2.)


    Being part of the crowd: mini-bonds and crowdfunding for franchise growth - Lexology


    The Financial Conduct Auhority (FCA) is responsible for the regulation of FCA authorised companies in relation to consumers. Note that there are principles of conduct that all FCA authorised firms are required to adhere to. These can aid you in your communications with investment providers. These principles are laid out in the FCA Handbook 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.

    [The review of London Capital and Finance, plc results from requests for a review from interested potential and existing investors. The review of London Capital and Finance (LC&F) plc is financially independent. No authors of the review have any financial connection with any of the companies, directors and officers named in the review. Many financial authors, lawyers, writers, researchers and private investors have contributed to the review without payment or charge. If LC&F plc fulfils its investor financial obligations to the bondholders in the LC&F minibond loan 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.]
    Last edited by bail-in; 24-06-2017 at 4:58 PM. Reason: update
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