London Capital and Finance

GDB2222

Reed_Richards wrote: »

https://www.ft.com/content/c1aa46e4-6b62-11e9-80c7-60ee53e6681d

That's behind a paywall. You can hopefully read the article here.

https://www.bbc.co.uk/news/blogs-the-papers-48114738


The gist is that a small number of investors contacted the compensation scheme direct and may have received misleading information.

sully1311

Viewable link without paywall:

https://www.ft.com/content/c1aa46e4-6b62-11e9-80c7-60ee53e6681d

EDIT: if you search in google news and click the link on there the whole article is viewable.

AnotherJoe

Reed_Richards wrote: »

https://www.ft.com/content/c1aa46e4-6b62-11e9-80c7-60ee53e6681d

Paywalled.
Is the gist that by allowing adverts to say "FCSC Protected" , it gave (and gives in respect of similar current ads) the highly misleading impression that these particular "bonds" were protected?
This is a big problem in general. IMNSHO no adverts should be allowed to say that, unless the products advertised are also covered. The average customer quite reasonably can't be expected to understand the distinction between the company being regulated and the products it sells being regulated especially when even experts can argue about the distinction depending upon the product.
EDIT I see by squinting at the enlarged photo of a page from one of the links above some investors are claiming FSCS told them these bonds were protected. Whether they did is difficult to know because they may have called and asked if LC&F were covered under the scheme and took that to mean the bonds were protected.

Malthusian

AnotherJoe wrote: »

Whether they did is difficult to know because they may have called and asked if LC&F were covered under the scheme and took that to mean the bonds were protected.

This is almost certainly what happened. As an FCA-authorised Ponzi scheme, LCF as a company was covered by the FSCS, but the bonds were not.

The generic answer issued by a call centre to "Is LCF covered by the FSCS" would therefore be "Yes".

If you ask the FSCS whether Hargreaves Lansdown is covered by the FSCS, the generic call centre answer would also be "Yes", it doesn't mean that the FSCS is going to pay out if the investments you hold via HL all go bust.

rr755507

Heres an email a bondholder sent in August 2018:

Customer:
"I recently invested £5000 in LCF PLC, please confirm that I am covered by the FSCS upto £50,000?"

FSCS:
"London Capital & Finance PLC are authorized by the Financial Conduct Authority and therefore covered by the FSCS up to the compensation limit of £50,000."

dunstonh

rr755507 wrote: »

Heres an email a bondholder sent in August 2018:

Customer:
"I recently invested £5000 in LCF PLC, please confirm that I am covered by the FSCS upto £50,000?"

FSCS:
"London Capital & Finance PLC are authorized by the Financial Conduct Authority and therefore covered by the FSCS up to the compensation limit of £50,000."

The answer is correct. However, it is not in the context that the person asking the question was after. Partly as the question was not in the right context either.

Reed_Richards

sully1311 wrote: »

EDIT: if you search in google news and click the link on there the whole article is viewable.

That is exactly what I did so I did not encounter the paywall. Sorry about that.

GDB2222

dunstonh wrote: »

The answer is correct. However, it is not in the context that the person asking the question was after. Partly as the question was not in the right context either.

There were 11,000 investors. I'd guess that maybe 1 in 100 or 1 in 1000 made an enquiry with FSCS. If so, the numbers are so small that FSCS may just take the view they'll pay those cases.

dunstonh

GDB2222 wrote: »

There were 11,000 investors. I'd guess that maybe 1 in 100 or 1 in 1000 made an enquiry with FSCS. If so, the numbers are so small that FSCS may just take the view they'll pay those cases.

If the FSCS pay those investors, then it will be retail consumers that end up footing the bill. The costs are always passed on.

AnotherJoe

rr755507 wrote: »

Heres an email a bondholder sent in August 2018:

Customer:
"I recently invested £5000 in LCF PLC, please confirm that I am covered by the FSCS upto £50,000?"

FSCS:
"London Capital & Finance PLC are authorized by the Financial Conduct Authority and therefore covered by the FSCS up to the compensation limit of £50,000."

A highly misleading yet correct answer. They need to sort something out. Perhaps schemes not companies need to be covered, so company needs to get cover for every scheme. Or two certifications, one for companies one for schemes. The current solution obviously isnt fit for purpose as its too hard for most to understand. Even the ones who have the nous to ask a Q of the FSCS dont understand. And evidently the FSCS dont understand either or they would have given a better and clear answer.
Lastly, of that person who asked, i dont see why they should get compo because they didnt state "I am intending to invest" they said "I recently (eg they already did) invested" so it was too late at that point.