FSCS sets aside £44m to pay London Capital & Finance compensation
The UK’s Financial Services Compensation Scheme (FSCS) today said it had earmarked £44m to pay claims from a small number of the investors who lost money after the collapse of investment company London Capital & Finance (LCF).
The FSCS said it would levy regulated financial firms £649m in the 2020/2021 year that started in April, £14m more than it had indicated in January, in part to cover the LCF claims.
“The overall increase in the FSCS levy since the January forecast partly reflects the ongoing progress we are making in relation to the LCF failure,” said FSCS chief executive Caroline Rainbird in a statement.
LCF went into administration in early 2019 with losses of up to £237m after the Financial Conduct Authority (FCA) directed the firm to withdraw promotional material for so-called “mini bonds”.
The compensation body had said it could only help 159 of 11,600 investors holding bonds issued by LCF, leading to bondholders to seek a judicial review of the FSCS’ decision.
“Whilst it is too early to say how many LCF customers will be eligible for compensation, for the purpose of the levy we have estimated an amount of £44m,” Rainbird said.
Elizabeth Gloster, a former High Court judge, is heading an independent inquiry into the FCA’s handling of LCF and is due to complete her report in the summer, which could help bondholders with their compensation claims.
Earlier this month FSCS said it would start issuing decisions on LCF claims relating to misleading advice given to its customers before the end of May.
It said it had already started reviewing individuals claims and said it expected to have finished the exercise by September.
FSCS said once a decision had been made on a claim, it would send a letter to the customer to inform them of the outcome.
If they are eligible for compensation, they will be sent a cheque, the FSCS said.
The FSCS said in January that it would protect 159 LCF bondholders who switched from stocks and shares ISAs to LCF bonds.
It said other customers of LCF would only be eligible if they could prove they were given misleading advice by LCF.