Total losses in 2019 from UK collapsed unregulated investments hit almost £1 billion

If 2016 was the Year of Dead Celebrities, 2019 is shaping up to be the year of the Collapsed Unregulated Investment Scheme.

Starting with the biggest of the lot, the collapse of the £230 million London Capital & Finance, we've seen the following schemes switch their lights off in 2019.

All have the following factors in common: they all issued investments not regulated by the Financial Conduct Authority, they all sourced investment predominantly from retail investors rather than institutions, and they all went into administration or another form of "official" shutdown in 2019.

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How can LCF investors get compensation? A look at the options

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Last week we noted the FSCS' reheated announcement that it would consider compensation claims by investors in London Capital and Finance if it deems they received advice from LCF's marketing agent.

With the potential for some LCF investors to be compensated and not others, it seems a good time to have a review of the full range of options available to the Government to compensate LCF investors if it wants to, based on how it has done so in the case of other collapsed investment schemes.

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What is a “mini-bond”? A mini history of a much-maligned label

[An expanded version of a Twitter rant posted last Monday ago.]

According to IFA trade rag Money Marketing, investors in London Capital and Finance are very angry that the Financial Conduct Authority has repeatedly referred to the loan notes in which they invested, marketed by LCF as "secured bonds", as mini-bonds.

So what is a mini-bond and why are LCF investors annoyed about the label? The FCA says (in an article belatedly posted last month) "There is no legal definition of a ‘mini-bond’, but the term usually refers to illiquid debt securities marketed to retail investors."

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FSCS tells potential victim of clone scam to ask the scammers if they’re FSCS-protected. *facepalm*

Earlier today I reviewed the latest in a series of clone scams which have jumped on obscure EU companies with "passporting in" rights to offer regulated services in the UK.

Because the genuine company is obscure and has no web presence of its own (it may even have shut down but the FCA didn't notice), the investor is unable to see, when they Google the company's name, that there are two "Andreas Geigers" and they have been given the wrong one. They are unable to contact the real Andreas Geiger to ask if they really offer bonds paying 17% per year.

One investor however still had concerns. They contacted the Financial Services Compensation Scheme to ask whether they would be protected if they invested their money with Andreas Geiger.

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What is due diligence, and what is pseudo diligence?

A theme that appears in nearly every review I post is the importance of due diligence when investing in unregulated or unlisted investments.

The problem is that “due diligence” is a much abused concept. Time and again you see people losing money because they think they were doing due diligence when they weren’t.

What they were actually doing is pseudo-diligence, i.e. something that felt like due diligence but in reality wasn’t.

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The LCF scandal was preventable. Here are 3 things we can do to stop the next London Capital & Finance

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A basic principle of law is that anyone who wants to take part in an activity that poses a high risk to the public should be regulated. If you want to own firearms for sport, drive a car, or offer investment securities to the public, you need to register yourself with the authorities. The law does not say you can't do it, but if you are going to do it, you have a duty to show you are doing it responsibly.

But did you know there is a loophole in UK firearms legislation that allows you to own a high powered assault rifle, as long as you put a sticker on it saying "This Is Not An Assault Rifle"? And that even if you start walking around in public waving your not-an-assault-rifle in people's faces, the police will take no action until people start getting hurt?

No there isn't, because that would be utterly ridiculous. Yet this is the situation that UK legislation allows in the offering of unregulated investments to the public.

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