London Capital and Finance bondholders to be bailed out by new £120m taxpayer scheme

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Nearly four months after the original announcement, the Treasury has finally announced that any London Capital and Finance investors who have not been refunded via the Financial Services Compensation Scheme will be bailed out almost in full by the taxpayer, up to a £68,000 cap. Around 8,800 people are expected to be eligible.

In a sop to fans of moral hazard, the new scheme will refund up to 80% of the original investment, minus any interest payments or dividends from the administration. Having faced near total losses for over two years, it is unlikely investors under the cap will be too upset by a 20% haircut. A smaller number of investors who invested significantly more than the cap could be facing very large losses: we are meant to assume that they were too rich for us to empathise with, but there could easily be first-time investors of middling or modest means who invested pension lump sums or inheritances.

The FCA will also make "ex gratia" payments to some investors who contacted it before the collapse, some of whom were told by FCA call centre staff that their investments in LCF were covered by the FSCS. More with-it call centre staff who attempted to protect investors and raise concerns were slapped down by FCA management.

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When will the Government put LCF investors and levy-payers out of their misery?

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The interminable saga of London Capital and Finance returned to the newspapers this week when John Glen, secretary to the Treasury, provided an update to the Sunday Telegraph on the announcement that the Treasury would set up an ad-hoc compensation scheme to compensate LCF investors who have so far missed out.

The update, three months after the compensation scheme was announced at the cig-end of 2020, is that there is no update at all.

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LCF to cost legitimate finance industry and general public nearly £200 million?

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Figures published by Money Marketing last week indicate that so far the FSCS has paid out £56.3 million to 2,878 investors in FCA-authorised Ponzi scheme London Capital and Finance.

At around £19,500 per investor, that's pretty typical of the average total investment.

Apart from £2.7m for investors who transferred a stocks and shares ISA, the vast majority of that was paid for LCF giving misleading "advice". Despite not being a financial advice firm, not being authorised to give financial advice, and employing no financial advisers, Financial Services Compensation Scheme levy payers, i.e. the general public, have been put on the hook on the basis of "I'd advise my own mother to invest in this" school of salesmanship.

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Bailey-Gloster LCF spat distracts from real issue

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An unedifying dispute broke out this week as Andrew Bailey testified to a Treasury Select Committee about the collapse of London Capital and Finance.

In one of the more depressing sections of Dame Gloster's report into the FCA's mishandling of the FCA-authorised Ponzi scheme (in a crowded field), Dame Gloster highlighted how, instead of using the investigation as an opportunity to learn from its mistakes, the FCA instead tried to shirk responsibility, claiming that holding individuals responsible for their failings might deter people from applying to be senior bureaucrats, and questioning whether, in a very real sense, there was any such thing as responsibility at all.

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Treasury announces further compensation scheme for LCF investors

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Shortly after the release of the Gloster report into the FCA's failings over London Capital & Finance, the Treasury announced that it would announce a scheme to compensate London Capital & Finance bondholders... maybe.

Taking into account the various channels through which people affected can seek compensation, the government will… set up a scheme to assess whether there is a justification for further one-off compensation payments in certain circumstances for some LCF bondholders.

John Glen, Economic Secretary to the Treasury

"Various channels" is a reference to the essentially random basis on which the Government has paid out compensation to LCF investors so far.

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Emboldened LCF investors secure crowd funding for FSCS legal challenge

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After being denied compensation from the Financial Services Compensation Scheme (other than a tiny handful of exceptions,) London Capital & Finance investors have raised money via crowdfunding to launch a judicial review.

As at 23rd April the campaign had already raised £7,833, exceeding its initial £7,000 target. Technically the campaign is to fund the judicial challenges of only the four LCF investors on the creditors' committee, but if their challenges succeed, this will set a precedent for the rest.

London Capital & Finance investors have been both emboldened and enraged by the FSCS' early indications that it will bail out investors in fellow collapsed minibond scheme Basset & Gold, which went into administration on 1 April.

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FCA knew about misselling of Blackmore Bonds three years before collapse

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The collapse of Blackmore Bonds has once again laid bare the Financial Conduct Authority's institutional contempt for its objective of consumer protection.

Paul Carlier, an independent consultant most well known for blowing the whistle on dodgy FX dealings at Lloyds, contacted the FCA on March 2017 to warn them that Blackmore Bonds' high-risk investments were being missold by an unregulated introducer named Amyma.

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