London Capital and Finance

Reaper

This seems both off topic and theoretical. The FSCS will pay up, and in the event of a crash that drains their coffers the government will lend them money to them to cover it.

bail-in

Reaper wrote: »

This seems both off topic and theoretical. The FSCS will pay up, and in the event of a crash that drains their coffers the government will lend them money to them to cover it.

With respect, my post is on topic as the application or non-application of the FSCS is an important issue re LC&F and other similar schemes and re the preferred regulated investments. As for the FSCS paying up you are right, the scheme generally honours compensation claims when financial institutions fail. However, in past claims there have been cases of failures of regulated investments protected under the FSCS where you would think the FSCS would compensate the investors for losses but did not because, even after reasonable due diligence, the investors claiming compensation could not satisfy the FSCS conditions. For example, in one case the application for compensation under the FSCS was rejected primarily because the investors were unable to find the company officers and therefore could not prove the condition that there were no assets left. Admittedly the rules are stricter when it comes to FSCS protection re investments than bank savings accounts.

masonic

bail-in wrote: »

With respect, my post is on topic as the application or non-application of the FSCS is an important issue re LC&F and other similar schemes and re the preferred regulated investments.

Perhaps not, as the closest equivalent regulated option ('light touch regulation' admittedly) is regulated P2P and that is specifically excluded from FSCS compensation too. Perhaps LC&F does regulated and unregulated bonds - I'm not as familiar with what they offer as you are.

For other mainstream investments, there may be an advantage to holding them on a platform with significant (consumer) assets under management, rather than a niche company that won't raise much publicity if it turned out to be dodgy. Let's not forget, presence on the FCA register can be fraudulent, and in that case promises of FSCS compensation would be empty.

robatwork

This thread deserves to go on some forum thread Hall of Fame.

Been using "forums" since bulletin board days back in 19howsyourfather and I know a classic thread when I see one.

Super work, all.

bail-in

masonic wrote: »

Perhaps not, as the closest equivalent regulated option ('light touch regulation' admittedly) is regulated P2P and that is specifically excluded from FSCS compensation too. Perhaps LC&F does regulated and unregulated bonds - I'm not as familiar with what they offer as you are.

For other mainstream investments, there may be an advantage to holding them on a platform with significant (consumer) assets under management, rather than a niche company that won't raise much publicity if it turned out to be dodgy. Let's not forget, presence on the FCA register can be fraudulent, and in that case promises of FSCS compensation would be empty.

The FCA and the helpline are staffed by focused and experienced workers in the financial world. It is enlightening conversing with the team that deals with applications for FCA approval. They are aware financial companies sometimes apply for membership for status only and they do monitor approved companies to see if the FCA is really suitable for them.

In my opinion LC&F applied to the FCA for perceived status. The reason for pursuing other things too, such as the perception of image changing from a Ltd company to a Plc. LC&F are doing the same unregulated business both before and after becoming FCA approved and the company admits it has no present or near future intention to offer regulated investments, the main focus of the FCA. It has only offered unregulated investments and unregulated business, commercial lending. The FCA will be watching them to see if it really is for them or not. In the meantime the FCA will be paid yearly by the LC&F around £2000.

I love this quote from Malthusian: "You can get FCA registration by sending in two tokens off the back of a cereal packet." It makes me chuckle :rotfl:

Sometimes it appears that parliamentary government bodies are another way of raising taxes. I read somewhere we are taxed some seven times between birth and death. Not that I begrudge it but increased taxation is a main no no and cause of the rare (unlike the Frenchies) British public disorder revolts in past history. Cruelly put down so my history teacher told me. OK, that is a little off topic. ☺

masonic

Thanks for the clarification. I thought LC&F was just offering unregulated products but wasn't sure.

On the subject of the FCA and its staff, they might be staffed by very good people, but it doesn't show. They allowed a certain P2P company to carry on a business for 2 years while claiming to be authorised, corresponded with said business over a period of at least a year, and only learned it wasn't authorised by monitoring a discussion forum like this one.

The company was able to fool the FCA because it turned out Authorised Firms can update their company name, address and other contact details through a web portal without oversight. So it was arranged for the record of a different limited company (at that time dormant) to be fraudulently altered to look like it belonged to this new company. It had everyone fooled until the company suddenly decided to shut its website and go into Administration, none of which was picked up on by the FCA until a week or two later when a certain forum was filled with discussion about it.

masonic

I've separated this bit for a reason...

Six months later, investors received a questionnaire from the FCA who were investigating the background to the situation. This came by email, addressed from an email address it appears was set up to communicate with investors in a different firm entirely. The implication was that it should be filled out electronically and returned by email, but it was a non-interactive PDF. Several days later they followed up with a word document. It also asked for quite a bit of personal information. These guys really seem at the top of their game.

Malthusian

Out of curiosity, I sent a Freedom of Information request to Companies House, to inquire whether they had any policy on when and how to intervene when a company persistently uses the shortened-accounting-date trick to blatantly flout its duty to submit timely annual accounts.

It didn't take them long to say the answer is no.

With reference to your email dated [...] in which you have inquired as to whether Companies House has a policy on when to take action, and what action to take, on a company that persistently uses the provision of the Companies Act Section 442(b)

Companies House does not hold information that falls within the scope of your request.

robatwork wrote: »

This thread deserves to go on some forum thread Hall of Fame.

You might want to move it to the Hall of Fame now before it gets deleted from MSE's servers. I can almost guarantee it will be one day, as a similar fate has befallen a number of similar threads.

masonic wrote: »

Six months later, investors received a questionnaire from the FCA who were investigating the background to the situation. This came by email, addressed from an email address it appears was set up to communicate with investors in a different firm entirely. The implication was that it should be filled out electronically and returned by email, but it was a non-interactive PDF. Several days later they followed up with a word document. It also asked for quite a bit of personal information. These guys really seem at the top of their game.

Those who can, do. Those who can't do, teach. Those who can't teach, steal. Those who can't steal, regulate.

bail-in

I am not that knowledgeable about audited accounting methods, both theory and practice. However, I do doubt, contrary to what LC&F say, that the audited accounts prove the existence of the claimed commercial lending business as the income source. Perhaps it does, in the sense of evidence, but perhaps there is another source too. Does it make a difference whether it is a full or a partial audit? In practice the result of analysing extra documents is usually the same as in the case of unaudited accounts as most companies are upfront with their accounts.

Corporate liquidations sometimes reveal the wrongful siphoning off or misusing of bondholder capital (which is under control by the issuer only) re stated purpose in the memorandum or prospectus, yet audited accounts may not reveal any warnings. For various reasons. How is it that audited companies can suddenly collapse "without warning" as some do? Or is it we as private investors do not look for the warnings. Certainly the warnings may have been there in hindsight which is a great teacher, but often too late re the past losses.

On the other hand, LSE listed fund investment managers would be legally and financially on the ball re due diligence and would not touch a company without full disclosure. Fund investment managers may want to know the colour of the CEO's socks, and perhaps how many he has! And no IFA would introduce an investment to clients without proper due diligence, which LCF will not provide because they are not legally required to do so. Which means no IFA would introduce LC&F.

Of course LSE fund investments can lose out too for investors. A colleague recently sold 17 year old investments in 2 popular LSE investment funds at a 40% loss on the original investments, not taking into account inflationary losses. Also paying out some 25% of the funds' investment value in management fees over that 17 year period. So much for the general rule of profit over a 12 year period re LSE investment! However, the listed funds are still in existence and the initial investment was at a very bad time in crashing tech funds which were later taken over by other non tech income growth funds.

Financial due diligence is not enough, and individual investors are often not as organised and limited in knowledge of what to look for, and how to analyse the data once they have it. Fraudulent, negligent or inexperienced investment offerers, issuers count on that ignorance or unwillingness in bondholders to investigate, especially when the investment issuer will not cooperate with due diligence requests. Walk away? But that higher interest rate is so tempting. It kind of makes the keen investor put aside the fact that capital is 100% at risk. He sees lots of other investors are joining up, but the lots of other investors can lose too.

LCF, on the loan section page of lcaf.co.uk, after receiving feedback about the absence of Feefo invited reviews (and such absence on any other online review sites) by corporate borrowers did in 2017 put one review up reputedly authored by a commercial loan customer attributed a personal name but no corporate name. That was soon removed and not replaced by any other named loan reviewers. That isolated and very limited even desperate attempt to evidence the commercial lending really made me wonder even more what was going on re the commercial lending side. And more so now that there is the claim of hundreds of LCF loan corporate borrowers and not one borrower review, invited or not. The fact that there is a belated application form for a corporate loan on the LCF website does not mean that applicants are approved for loans.

From a practical perspective, stating that there have been no defaults by LCF borrowers in loan interest payments and repayment of end of term loans is also hard to believe as it goes against the facts. According to one statistical source, 16% of smes fail within the first year and 66% in 5 years. Why would banks significantly cut back sme lending after the 2008-10 crisis if they were not at high risk of default since that time?

You will not usually find lists of corporate customers' names in Companies House lodged company accounts. You may find them on the corporate website, perhaps showcased. But on the LCF website you only find companies, such as accountants and solicitors that they do business with to help LCF operate. There will not be one borrower showcased, even the large corporate borrower of the 1 million pound loan. Data protection as an excuse does not cut it. Other commercial lenders showcase their loan clients, corporate customers. It took a bit of digging to find out who the sole borrower was re the only loan by LC&F in the accounting period 2014-15, the trial run for the mini-bond issue according to Surge Financial Ltd, the bond payments management team. How is lending to yourself a trial run for the LC&F mini-bond offer, and why the need for such when LCF (LC&F) states it has been a commercial lender since 2012. Although, saying you are a commercial lender is not as reliable as showing that you are. Then again, the CEO's CV lists experience working in major banks re lending, though I have been unable to confirm that.

Viewers have to accept that the corporate accounts auditing procedure is comprehensive as the rules do appear to suggest. However, professional procedures in theory are sometimes lacking in practice. That could be applied to all professions, as has been found in professional societies. One auditing accountant told me sometimes you just take what your given as samplings to audit, perhaps just ten customer names possibly out of hundreds and selected by the directors. Some firms, I guess, would be more efficient than others. Also depends on the level of the audit.

Reaper

An over wordy post lacking in facts, and just when it looks like you finally might give a useful bit of info you frustratingly skip past it!

You said

bail-in wrote: »

... put one review up reputedly authored by a commercial loan customer attributed a personal name but no corporate name. That was soon removed

So what was the name?

You also said:

bail-in wrote: »

It took a bit of digging to find out who the sole borrower was re the only loan by LC&F in the accounting period 2014-15 ... the bond payments management team.

So they lent to themselves? Please explain where you are looking.