Fewer than 160 of the 11,600 victims of the London Capital & Finance minibonds scandal will definitely be compensated for their loss, the Financial Services Compensation Scheme declared today.
Investors responded with fury after it ruled only the 159 bondholders who switched from stocks and shares ISAs to LCF bonds were sure to be compensated. Furthermore, only those who did so after a rule change on 7 June 2016 would be eligible, ruling out a further 283 people.
The FSCS is funded by the investment industry to pay out when regulated financial firms fail.
It ruled that issuing minibonds was not a regulated activity, and therefore was not something it protects, although it acknowledged some victims may have received misleading advice from LCF and have valid claims for compensation.
The Evening Standard has highlighted the cases of many victims who claim they were wrongly advised to buy in face-to-face discussions.
The FSCS said it would review such “misleading advice” claims on a case-by-case basis but warned: “While we acknowledge that many customers were given incorrect information about investing in LCF bonds, being given incorrect information on its own doesn’t constitute misleading advice.”
That meant many such customers were unlikely to be eligible for compensation. Victims are now expected to demand sales call transcripts in order to pursue their claims.
One responded: “This is just a whitewash. Thousands of people are going to be very disappointed. Why have we waited 10 months for them to come up with this?”
Thomas Donegan, a lawyer helping bondholder victims, described the FSCS’s definitions of who could and could not claim as “illogical and unfair”.
He was among many investors claiming that the FSCS decision was convenient for the Financial Conduct Authority regulator, which has always claimed it was not responsible for regulating LCF.
There is an investigation by Dame Elizabeth Gloster into whether the FCA failed in its supervising of LCF.
LCF and its chief executive were authorised by the FCA, as were its marketing materials.
