London Capital & Finance Compensation scheme
The London Capital and Finance Compensation Scheme will provide compensation to eligible bondholders who lost money following the collapse of London Capital & Finance (LCF).
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Overview
LCF was a Financial Conduct Authority (FCA) authorised firm which issued unregulated non-transferable debt securities, commonly known as ‘mini-bonds’, to investors and then speculatively invested the funds received in a number of underlying businesses. LCF went into administration in January 2019 and at the point of failure 11,625 bondholders had invested around £237million.
In May 2019, the government directed the FCA to launch an independent investigation into the events relating to the FCA’s regulation and supervision of LCF. Dame Elizabeth Gloster led the investigation, and her independent review (PDF 7.3 MB) , which the government published in December 2020, concluded that the FCA did not discharge its functions in respect of LCF in a manner which enabled it to effectively fulfil its statutory objectives during the relevant period.
Alongside publication of the report the government announced that it would establish a compensation scheme for bondholders who had lost money following LCF’s collapse. The Economic Secretary to the Treasury announced the details of the scheme 21 April 2021.
The scheme
The LCF Compensation Scheme is a government funded scheme designed to compensate bondholders who suffered losses after investing in LCF, which entered administration in 2019.
The government has announced it will establish a scheme that provides 80% of LCF bondholders’ initial investment up to a maximum of £68,000. Where bondholders have received interest payments from LCF or distributions from the administrators, Smith & Williamson, these will be deducted from the amount of compensation payable.
The scheme will be available to all LCF bondholders who have not already received compensation from the Financial Services Compensation Scheme (FSCS) and represents 80% of the compensation they would have received had they been eligible for FSCS protection.
Next steps
The government introduced the necessary legislation on 12 May 2021 and has announced that the FSCS will administer the scheme. The FSCS are committed to ensuring that payments are made to all LCF bondholders eligible under the government scheme within 6 months of the legislation passing through Parliament.
Bondholders do not need to do anything at this stage. The government will provide further details on how the scheme will operate in due course. Bondholders will not need to use a claims management company, solicitor or any other organisation to help claim compensation from the scheme.
Some individuals may be anxious to receive their compensation and the government would encourage all bondholders to be vigilant to the risk of scammers posing as services to help them claim.
Updates to this page
Last updated 12 May 2021 + show all updates
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The government introduced the necessary legislation on 12 May 2020 and has announced that the FSCS will administer the scheme.
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First published.