London Capital & Finance: CEO and founder both arrested, administrator revises expected recovery downwards

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Two of the four individuals arrested in connection with London Capital & Finance have been named as Simon Hume-Kendall, who founded the company that became LCF and whose companies later borrowed significant sums from it; and Andrew Thomson, LCF’s chief executive.

The identities of the other two people arrested remain unknown at time of writing. All four of those arrested were released without charge.

As MPs continue to demand answers from the FCA, the political plot has thickened with the news that the administrator may demand the return of over £50,000 donated to the Conservative Party by Hume-Kendall if it can be proved that the money came from LCF. A source close to Hume-Kendall claims that the money came from Hume-Kendall’s personal wealth.

Since the Tories helped out London Capital & Finance immensely by introducing the monstrosity that is the Intelligent Finance ISA, it would be a nice gesture if it didn’t wait for the administrator to go through LCF’s bank statements and instead handed the money back immediately. Particularly as there are likely to be a large number of Tory voters among LCF’s victims, given that they were predominantly elderly and, if not well-off, at least in possession of enough money to be a target.

The introduction of the Intelligent Finance ISA allowed LCF to promote itself using the ISA label (inaccurately, as it turned out). The ISA label is, rightly or wrongly, viewed by most UK retail investors as a “CAT standard”. Unsurprising given that the Government encourages people to invest in them as a tax break. Until the introduction of the IFISA, it also restricted investments to authorised deposits (cash ISAs), regulated collective investments or securities traded on a regulated exchange, which gave a further level of assurance.

The introduction of the IFISA by George Osborne in 2016 allowed promoters of investments like London Capital and Finance to not only use the ISA label, but access a lucrative new market; those savers who have built up significant sums in cash ISAs currently earning a very low rate of return.

From “the numbers all add up” to 20% to 17% to…

A company related to LCF, London Oil & Gas Limited, has also been put into administration by Smith & Williamson.

The Evening Standard also reveals that the administrators have revised the estimated recovery downwards. Previously Smith & Williamson were talking about recovering 20% of the money, but this has now become £40 million of the £236 million invested (which is 17%).

The 20% figure was originally described as a “base” figure on the BBC’s Money Box radio show, but it later become clear that a better term would be “best case”, which has now been proven by the fact that “best case” figure has now been cut to 17%.

It would sadly be no surprise if this figure is not revised downward further by the time the administration completes.

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