London Capital and Finance

GDB2222

Reaper wrote: »

Compared to a savings account it is high, but not excessive in the investment world.

For example apparently the British & American Investment Trust has a yield of 18.1%
https://www.theaic.co.uk/companydata/50396
and that doesn't seem to be a one off:
https://www.theaic.co.uk/companydata/50396/overview/dividends
That's so high there is probably a catch. I haven't checked as it is not one of my investments, but you get the idea.

The LCF return was high enough to make me wary, but not to automatically exclude it based on that alone.

It begins to sound as though a good strategy for scamming people would be to offer a return of say 2.5%, as that's not obviously TGTBT.

masonic

GDB2222 wrote: »

It's not quite as straightforward as all that, though.

Here's the LCF authorisation, and bear in mind that Joe Public is apparently supposed to know the difference between "Advising" and "Arranging". LCF could "advise" professional clients but "arrange" for professional and retail clients.

I'd imagine more people visited the LCF website than visited LCF's page on the Financial Services Register. On the website it was clearly stated that FSCS protection did not apply. The same can be said of the information memorandum issued to each bondholder, which also strongly recommended that they seek advice on the suitability of the investment (though it didn't specify 'not from us').

I don't think the average bondholder would have known that the guidance they might have received was not advice, or that giving advice is a regulated activity, or that they would have had certain protections if they did receive regulated advice.

Bondholders are now, perhaps quite understandably, latching on to things that they have learned, such as that there would have been recourse to the FSCS if they had received regulated advice from LCF, and desperately trying to match their circumstances to any possible scenario in which this could be true in their case.

AnotherJoe

Reaper wrote: »

Compared to a savings account it is high, but not excessive in the investment world.

For example apparently the British & American Investment Trust has a yield of 18.1%
https://www.theaic.co.uk/companydata/50396
and that doesn't seem to be a one off:
https://www.theaic.co.uk/companydata/50396/overview/dividends
That's so high there is probably a catch. I haven't checked as it is not one of my investments, but you get the idea.

The LCF return was high enough to make me wary, but not to automatically exclude it based on that alone.

HL says it has a 5.7% dividend yield.
https://www.hl.co.uk/shares/shares-search-results/b/british-and-american-inv-tst-plc-ord-shs-gbp1

bail-in

masonic wrote: »

Bondholders are now, perhaps quite understandably, latching on to things that they have learned, such as that there would have been recourse to the FSCS if they had received regulated advice from LCF, and desperately trying to match their circumstances to any possible scenario in which this could be true in their case.

Remember, the conditions for bondholder FSCS compensation for covered protected investments when a company goes bust are more onerous than savings protection. It has to be shown that there are no asserts, for example. So if protection applies there are FSCS hurdles to overcome to qualify.

bail-in

masonic wrote: »

Bondholders are now, perhaps quite understandably, latching on to things that they have learned, such as that there would have been recourse to the FSCS if they had received regulated advice from LCF, and desperately trying to match their circumstances to any possible scenario in which this could be true in their case.

Note that the conditions to be met for bondholder FSCS compensation for covered protected investments when a company fails are more onerous than FSCS savings protection. It has to be shown by claimants that there are no assets, for example. So if protection applies there are still FSCS hurdles to overcome to qualify for compensation.

masonic

bail-in wrote: »

Remember, the conditions for bondholder FSCS compensation for covered protected investments when a company goes bust are more onerous than savings protection. It has to be shown that there are no asserts, for example. So if protection applies there are FSCS hurdles to overcome to qualify.

The route bondholders are attempting to pursue is for bad regulated advice. There is no need for investments to be protected to qualify for FSCS compensation for bad advice. You just need a Financial Ombudsman decision that your adviser should give you partial or full redress for the capital you lost, and if that adviser is unable to meet their obligation to repay you the FSCS will compensate you.

The problem is, bondholders didn't receive regulated financial advice, even if they, in hindsight, think what they were told on the phone might qualify. So this route is dependent on the FSCS breaking its own rules, which it has done before but might not do again.

The other route open to bondholders is a complaint against the FCA, for which there is also precedent, but is also far from guaranteed.

Reaper

AnotherJoe wrote: »

HL says it has a 5.7% dividend yield.
https://www.hl.co.uk/shares/shares-search-results/b/british-and-american-inv-tst-plc-ord-shs-gbp1

It's off topic but I'm not sure why HL say that. According to their own figures on that page the dividends paid over the last year were:
Interim 2.7p
Final 5.9p
So 8.6p on a current Buy price of 51p is almost 17%
Maybe they are using an older buy price since it has dropped in value over the last year.

Malthusian

GDB2222 wrote: »

It begins to sound as though a good strategy for scamming people would be to offer a return of say 2.5%, as that's not obviously TGTBT.

There is a niche for that (hence the clone scams offering 3.9% which one MSE poster thought wasn't TGTBT) but not a large one.

If investors are offered an unregulated scam offering 8% and an unregulated scam offering 2.5%, most will go for the first one, if they are going to go for either.

8% is the sweet spot where you attract the largest number of marks - any lower and they will either be too reluctant to leave the regulated arena (ignoring the fact that LCF was FCA-authorised) or go for another scam. Higher and they start to think too good to be true, although you can go up to around 12% before the story becomes totally implausible and you are reduced to a labour-intensive take-the-money-and-run scam as opposed to a Ponzi scheme that can be sustained for a few years.

This doesn't mean all scams will offer 8%, because there is room in the market for multiple price points and no point in all scammers chasing the same marks. It's the long tail theory of scamming.

Supercalafragalistic

Malthusian......thanks for introducing me to yet another concept i hadn't heard of...long tail scamming. (If you have any more detail on this, that would be good too). I have learnt so much from your posts on here, and your direct way of explaining things has helped tremendously. Cheers.

AnotherJoe

Reaper wrote: »

It's off topic but I'm not sure why HL say that. According to their own figures on that page the dividends paid over the last year were:
Interim 2.7p
Final 5.9p
So 8.6p on a current Buy price of 51p is almost 17%
Maybe they are using an older buy price since it has dropped in value over the last year.

Perhaps if those were one-off payments that HL don't see being replicated next year they don't regards the 17% as appropriate looking forward? Just as theory, obviously I don't know.