London Capital and Finance

masonic

AnotherJoe wrote: »

I disagree they are clear, at least in the way they are implemented and the way FSCS allowed LC&F to use their backing in a misleading way for so long.

For at least three years after being warned by an IFA (rather than just joe public complaining although that was happening also) , FSCS (and advertising standards) allowed those highly misleading ads about being covered by FSCS to continue until they pulled them end of last year because they were misleading.

Yet again, you are confusing the FSCS and FCA. These are two completely different organisations, which has been explained to you about 4 times now.

I stated "There are very clear rules governing when the FSCS does and does not apply." For the avoidance of doubt, this does not mean I think bondholders were clearly informed about the product, nor that the situation around FCA regulation of LCF was clear.

Once again, the FSCS is the compensation scheme, not the regulator. It covers regulated financial services provided to retail consumers. Coverage applies when a consumer is provided with a regulated product or service that creates a financial obligation which the regulated firm cannot meet. Regulated products include: a deposit account, a client money account, a retail investment fund, regulated financial advice, and several other categories. It does not include: direct investment in individual company shares or investment bonds, peer to peer lending, and several other categories.

I think there's a case to be made that by allowing the ads to run for so long, FSCS gave the impression the bonds were covered rather not just any financial advice that LC&F gave. (thats the case is it not, that financial advice by LC&F was covered?)

The FSCS (the industry funded compensation scheme) has absolutely no control over what firms tell people. The regulator of financial services is the Financial Conduct Authority or FCA. The FCA should have acted to stop the misleading ads, especially after it (the FCA) was warned by an IFA years earlier.

Also, in which case, if someone called LC&F, required about the bonds and were advised by them to buy, would they not be covered since they received advice? Whereas if i just bought some without discussing the background then i didnt receive advice so i wouldnt be?

A claim in respect of regulated financial advice would need to go via a complaint to the regulated financial adviser (FA) for unsuitable advice. The adviser would need to either reject the claim or go bankrupt, causing the complaint to be escalated to Financial Ombudsman Service. The FOS decision is legally enforceable against the bankrupt FA and would trigger FSCS compensation (to the extent of the compensation awarded by the FOS).

The whole thing is a big ugly mess and FSCSFCA and advertising standards dont come out of this covered in glory but soemthing smellier, I recall posts here years back where someone complained and got passed back and forth between the two with no action. If the ads were misleading in 2018 why weren't they misleading in 2015?

Corrected for you, and I agree it's a poor show on the part of the FCA and ASA.

Add to the mess, it seems it may not just be a case of the bond went south because the investments were mismanaged, but it went south allegedly because of underlying fraud as indicated by recent arrests. In that case, would FSCS guarantee not cover losses arising from such alleged fraud were it to be proven?

The FSCS does not cover direct investment in individual company shares and investment bonds, even mainstream ones. It never has.

I'd say one thing it certainly isn't, is "clear" and whilst i do think the buyers of these bonds were foolish to purchase, i dont blame them for spending a few £k, even hundreds of £k, they looking to see if they can get redress for millions. Even if its a hundred to one shot, the ratio of return would be thousands to one so it's a bet worth taking.

There is no doubt the investors in these LCF mini-bonds were misled by advertising regarding the amount of risk, but there is no evidence that FSCS cover was ever promised and plenty of evidence (e.g. the LCF website and financial promotions going back 3+ years pointing out FSCS cover does not apply). Of course we can never know what was said on the phone.

rr755507

Supercalafragalistic wrote: »

Where did elten go from this thread...he seemed really well informed?

Check out the Facebook group "London Capital & Finance assets" I suspect he had a hand in it

masonic

Malthusian wrote: »

That will be news to the investors in ARM (initially refused a payout, investors challenged this and won), investors in scams facilitated by Berkley Berk and other dodgy SIPP providers (the case continues), and the investors in Secured Energy Bonds and Providence Bonds (FOS initially refused to even look at claims against the FCA-regulated firm that approved the marketing material, then changed its mind after a legal challenge, FSCS claims against that firm are now in progress).

The rules may be clear but the application of them is not. The FSCS' favourite phrase is "oh, go on then, but don't tell your mother".

Those cases mentioned apply to claims against regulated advisers for bad advice. This is clearly a more convoluted process as, it requires the FOS to uphold a complaint and award compensation, and of course it requires the complaint to be in relation to a regulated product or service (such as regulated financial advice).

The latter claim, which is as you say in progress, does seem to be a misapplication of the rules as IPM did not give regulated advice. It is certainly the right decision that the FOS should accept complaints for adjudication. The question is whether their decision meets the test for a FSCS payout, bearing in mind FOS compensation may or may not be backed up by FSCS compensation depending on the nature of the firm and service provided.

If FSCS does end up covering investors' losses, then this would open up the floodgates to investors in all unregulated investments that followed the due process of getting their financial promotions approved - including LCF. It's hard to see how the industry-funded scheme into which none of these companies have paid in a penny, could be used in this manner.

All discussed more at length here. I have to agree with the concluding paragraphs:

"If the FSCS does pay out over Secured Energy Bonds and Providence Bonds – even where no SIPPs were involved and no financial advice was involved – we can expect a huge backlash from the regulated world.

More likely is that the FSCS will reject the claims, and the Secured Energy and Providence investors will finally be allowed to come to terms with the loss of their investments."

jimjames

AnotherJoe wrote: »

Add to the mess, it seems it may not just be a case of the bond went south because the investments were mismanaged, but it went south allegedly because of underlying fraud as indicated by recent arrests. In that case, would FSCS guarantee not cover losses arising from such alleged fraud were it to be proven?

Are you suggesting that any Patisserie Valerie shares I purchased inside my ISA are now covered by the FSCS because there was fraud involved? My ISA is covered by the FSCS.

jimjames

HMRC have also confirmed today that LCF ISAs have been voided and any recovered funds will also be outside the ISA wrapper.

https://damn-lies-and-statistics.blogspot.com/2019/03/lcf-hmrc-isa-notice.html

masonic

jimjames wrote: »

HMRC have also confirmed today that LCF ISAs have been voided and any recovered funds will also be outside the ISA wrapper.

https://damn-lies-and-statistics.blogspot.com/2019/03/lcf-hmrc-isa-notice.html

I don't know where to start on this one...

"The mini-bonds offered by LCF were not qualifying ISA investments because they were not a transferable security"
...but other non-transferable securities, such as peer to peer loans are allowed to be held in IF ISAs. The more plausible reason is that investments must be FCA regulated, which the mini-bonds were not.

"Any interest or growth you received from funds invested in the account is savings income and may be liable to tax."
Savings income? It is certainly income, and it is certainly taxable income, but savings income? Is this how HMRC would describe the interest from corporate bonds?

An interesting question is who HMRC will pursue for unpaid tax (i.e. the LCF administrators as LCF should have withheld it, or the individual who may not be in a position to pay it) and how far back they will go.

londoninvestor

masonic wrote: »

I don't know where to start on this one...

"The mini-bonds offered by LCF were not qualifying ISA investments because they were not a transferable security"
...but other non-transferable securities, such as peer to peer loans are allowed to be held in IF ISAs. The more plausible reason is that investments must be FCA regulated, which the mini-bonds were not.

Yes:

HMRC wrote:

The operator must have permission, other than interim permission under Chapter 4 of Part 8 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2013 to carry on one or more of the activities specified in Articles 36H (operating an electronic system in relation to lending) and 39G (debt administration).

---

masonic wrote: »

Savings income? It is certainly income, and it is certainly taxable income, but savings income? Is this how HMRC would describe the interest from corporate bonds?

Yes, though it's frustratingly difficult to find that written in one place - even in legislation. (As HMRC say: "Interest is not defined in the Taxes Acts. It is a concept of common and contract law.")

But the description of the "Personal Savings Allowance" at least makes it clear that corporate bonds are included:

Your allowance applies to interest from:

bank and building society accounts
savings and credit union accounts
unit trusts, investment trusts and open-ended investment companies
peer-to-peer lending
trust funds
payment protection insurance (PPI)

Your allowance also applies to interest from:

government or company bonds
life annuity payments
some life insurance contracts

Malthusian

masonic wrote: »

Those cases mentioned apply to claims against regulated advisers for bad advice.

Wrong. Not a single one of those cases involves regulated advice. That's why I brought them up.

The fact that bad advice from a regulated adviser is a protected claim is not in doubt and not relevant to LCF.

If FSCS does end up covering investors' losses, then this would open up the floodgates to investors in all unregulated investments that followed the due process of getting their financial promotions approved - including LCF. It's hard to see how the industry-funded scheme into which none of these companies have paid in a penny, could be used in this manner.

And yet here we are.

The blogger appears not to have heard of Catalyst / ARM.

AnotherJoe

jimjames wrote: »

Are you suggesting that any Patisserie Valerie shares I purchased inside my ISA are now covered by the FSCS because there was fraud involved? My ISA is covered by the FSCS.

I'm not suggesting anything.
That was a question.
And you've answered it very well for that case.
However the difference here would appear to be, on the basis of whats been published so far and of course I am not alleging anything, to continue with your analogy, its as if all the directors of PV were running an ISA that contained (and could only contain) only one single investment, the "PV Bond which is fully asset backed" and they were (hypothetically) knowingly perpetrating a fraud knowing that there was no asset protection..

AnotherJoe

masonic wrote: »

Yet again, you are confusing the FSCS and FCA. These are two completely different organisations, which has been explained to you about 4 times now.

I stated "There are very clear rules governing when the FSCS does and does not apply." For the avoidance of doubt, this does not mean I think bondholders were clearly informed about the product, nor that the situation around FCA regulation of LCF was clear.

Once again, the FSCS is the compensation scheme, not the regulator. It covers regulated financial services provided to retail consumers. Coverage applies when a consumer is provided with a regulated product or service that creates a financial obligation which the regulated firm cannot meet. Regulated products include: a deposit account, a client money account, a retail investment fund, regulated financial advice, and several other categories. It does not include: direct investment in individual company shares or investment bonds, peer to peer lending, and several other categories.


The FSCS (the industry funded compensation scheme) has absolutely no control over what firms tell people. The regulator of financial services is the Financial Conduct Authority or FCA. The FCA should have acted to stop the misleading ads, especially after it (the FCA) was warned by an IFA years earlier.


A claim in respect of regulated financial advice would need to go via a complaint to the regulated financial adviser (FA) for unsuitable advice. The adviser would need to either reject the claim or go bankrupt, causing the complaint to be escalated to Financial Ombudsman Service. The FOS decision is legally enforceable against the bankrupt FA and would trigger FSCS compensation (to the extent of the compensation awarded by the FOS).


Corrected for you, and I agree it's a poor show on the part of the FCA and ASA.


The FSCS does not cover direct investment in individual company shares and investment bonds, even mainstream ones. It never has.


There is no doubt the investors in these LCF mini-bonds were misled by advertising regarding the amount of risk, but there is no evidence that FSCS cover was ever promised and plenty of evidence (e.g. the LCF website and financial promotions going back 3+ years pointing out FSCS cover does not apply). Of course we can never know what was said on the phone.

My bad and apologies for using the wrong initials (again).

The point is, the organizations that should have been protecting consumers clearly failed to act on blatantly obvious failings, not on the inherent alleged fraud (though that could have also been deduced from the nature of the misleading adverts), but on letting those adverts run for so many years before taking action.


Added to that, i dont think, as a point of principle, it should be allowed to mention FCA certification in an advert thats pretty much only selling something that doesn't have that FCA certification apply.

If Acme Financial sells two products/services one of which has FCA regulation applicable and the other doesnt, blazing "FCA Regulated" on the advert for the non applicable product very clearly gives a misleading impression whatever the small print or footnotes say. And that is, indeed why the adverts were (ludicrously late) withdrawn. The discovery of alleged fraud came later when the alleged Ponzi scheme was shut down.
I think both organizations were disgracefully remiss (obviously so) and that fact by itself might lead to their being compensation. Might. I can see why creditors think its worth a shot.