On 30 January 2019, London Capital and Finance plc (LCF) appointed Finbarr O’Connell, Adam Stephens, Henry Shinners and Colin Hardman of Smith and Williamson LLP as joint administrators. These appointments have been made by order of the court. The administrators’ function is generally to act in the interest of the company’s creditors as a whole, and this must be done as quickly and efficiently as is reasonably practicable.
The joint administrators will contact all affected parties in due course, including those borrowers which LCF loaned money to and bond holders. For more information about the administration please:
Call UK: 0800 046 7006 or International: +44 (0)20 3281 1808
Email: [email protected]
Write: FAO: The Administrators London Capital & Finance plc (in administration)
c/o Smith & Williamson LLP
- December 2019 update
- Who appointed the joint administrators?
- I am a bond holder, will I get my money back?
- Do I need to use a third party to get my money back?
- Being Alert to Scams
- What is a mini-bond?
- What concerns led to the FCA to take action against LCF?
- Did LCF need to be authorised?
- Will investors be able to get compensation from the Financial Services Compensation Scheme?
- Will investors have a tax liability as the products are not ISA eligible?
- Independent Investigation
- Serious Fraud Office
Together with the Serious Fraud Office (SFO), we continue to investigate actions relating to the sale of mini-bonds and ISA bonds by London Capital and Finance (LCF).
The FCA is investigating multiple lines of enquiry concerning individuals and companies connected to LCF. To date, we have obtained tens of thousands of documents and are undertaking a thorough and forensic review of those. Thousands of hours have been spent on the investigation by FCA enforcement staff since it was opened and we are actively pursuing all reasonable lines of enquiry.
We have a received a lot of information from investors and appreciate the time taken to send us this. We will use the information investors have provided as part of our evidence review to help us build a more detailed and comprehensive picture of what happened. Where we need to ask further questions, or take witness statements, we will contact investors directly.
Please understand that this is a current criminal investigation and for legal reasons we may not be able to give you as much information as you would like. We appreciate this can be a frustrating and worrying time for investor victims and hope you understand that cases of this complexity do take time to investigate fully.
The FCA and SFO are committed to victim care. We will continue to update our websites every few months to let you know how this matter is progressing.
In the meantime, please:
- See our websites for support information for victim support services and organisations that can provide financial advice.
- Keep safe any relevant material concerning your investment, as this may be required by the investigation teams.
- Be aware that personal data you provide the FCA or SFO in connection with this case will be handled in accordance with the General Data Protection Regulation and Data Protection Act 2018, and may be shared between investigating agencies for law enforcement purposes.
- We do appreciate that there is a support network between fellow investor victims in this case, but please consider the possible dangers of sharing your personal information and experience on public access online platforms. For more information go to – Get Safe Online
- If you have not already done so, please complete the online questionnaires published on the Financial Services Compensation Scheme (FSCS) and the Smith & Williamson websites.
- You can find more information on the investigations into London Capital and Finance Plc on the FCA, SFO, FSCS and Smith and Williamson websites.
The directors of the company received independent advice and determined that the company was insolvent. They then appointed the joint administrators. The FCA consented to the appointment of the joint administrators.
The company’s estate will be dealt with by the administrators, who will assess the company’s assets and put forward proposals as to how they will proceed with the administration. The joint administrators will write to you with their proposals for the administration within eight weeks of appointment, this will include the process of how you make a claim.
If you are approached by a company offering to help you recover your money, you should proceed with caution. For the vast majority of LCF’s bond holders, there will be no benefit in involving a third party in making a claim. If you have any questions about the administration process, please contact the joint administrators using the contact details above.
All customers should remain alert to the possibility of fraud. If you are cold called by someone claiming to be from LCF or Smith & Williamson, please end the call and call them back using the number above.
There is no legal definition of a ‘mini-bond’, but the term usually refers to illiquid debt securities marketed to retail investors.
A mini-bond is essentially an IOU issued by a company (the issuer) to an investor, in exchange for a fixed rate of interest over a set investment term. At the end of the term the investors’ capital is due to be repaid.
The return on investors’ money entirely depends on the success and proper running of the issuer’s business. If the business fails, investors may get nothing back.
London Capital & Finance PLC (LCF) was the issuer of mini-bonds which it stated it used to make loans to corporate borrowers to provide capital for further investment. The FCA believes there are approximately 14,000 customers invested in its bonds.
Issuing mini-bonds is not normally a regulated activity so firms issuing mini-bonds do not usually need to be authorised by the FCA. However, when an authorised firm approves a promotion for mini-bonds, they must ensure that it is in line with FCA rules that the financial promotion is fair, clear and not misleading. This means, for example, that risks are appropriately communicated.
On 10 December 2018 the FCA directed LCF to immediately withdraw its promotional material on the basis that the way in which it was marketing it bonds was misleading, not fair and unclear. The FCA’s concerns included the fact that LCF bonds were being marketed as ISA eligible when they were not – for further details see the FCA’s Second Supervisory Notice dated 17 January 2019. The FCA immediately commenced an investigation into the firm’s promotions.
In order to further protect investors, and because the FCA had serious concerns about the way the firm was conducting its business, on 13 December 2018 the FCA imposed certain requirements on LCF including (a) not to dispose of or deal with its assets, save in limited circumstances (b) to cease conducting all regulated activity and (c) not to communicate any financial promotions. These requirements were imposed pursuant to a voluntary application by LCF.
Firms are required to be authorised by the FCA if they undertake any of the regulated activities listed in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (the Order). Authorised firms are subject to a set of overarching principles and rules issued by the FCA. These principles and rules have to be followed when an authorised firm is carrying on regulated activities in the UK. The Order excludes certain activities from its scope.
Issuing mini-bonds does not normally involve the carrying on of a regulated activity. Therefore, LCF did not need to be authorised to issue the mini bonds but did need to be authorised to issue the promotion of the mini bonds.
For the latest position for LCF investors, please go to the FSCS website.
On the 19 March 2019 HMRC contacted bondholders to inform them that they had decided that the Innovative Finance ISAs offered to investors by LCF did not comply with the requirements of the ISA regulations. The mini-bonds offered by LCF were not qualifying ISA investments because they were not a transferable security.
ISA account holders can contact HMRC by email at [email protected] with any questions relating to their LCF ISAs.
On 1 April 2019 the FCA announced that the Board had taken a decision that there should be an investigation by an independent person into the issues raised by the failure of London Capital & Finance (LC&F). The investigation should cover questions in two areas:
- whether the existing regulatory system adequately protects retail purchasers of mini-bonds from unacceptable levels of harm
- the FCA’s supervision of LC&F
On 2 April 2019 Charles Randell, FCA Chair wrote to the Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee to provide further details on the Board’s decision.
On 18 March 2019, the Serious Fraud Office announced that they had commenced an investigation in to various individuals associated with LCF. The investigation was opened as a result of the FCA referring the matter to the National Economic Crime Centre (NECC) which is based at the National Crime Agency’s London HQ and includes officers from the Financial Conduct Authority, the NCA, HM Revenue and Customs, the City of London Police, the Serious Fraud Office, the Crown Prosecution Service and the Home Office. The FCA’s investigation into these matters will proceed jointly with the SFO’s.