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'Advised' mini bond clients may be eligible for £50k compensation

'Advised' mini bond clients may be eligible for £50k compensation

Some of the 11,600 investors who lost a total £237 million in the collapse of mini-bond lender London Capital & Finance earlier this year may have legitimate claims for compensation.

Insolvency experts at law firm Mishcon de Reya, currently investigating the firm alongside administrator Smith & Williamson, said some backers may be able to claim Financial Service Compensation Scheme (FSCS) funds because the sales process may have constituted advice.

The FSCS, which can pay out up to £50,000 when an investor has lost cash on a regulated purchase, has until now insisted that the sales were non-advised, under the technical definition used by the Financial Conduct Authority.

In its formal insolvency report in March, Smith & Williamson said that in ‘a small number of cases LCF representative may have provided investment advice to customers’.

It posted a questionnaire to investors last month in an attempt to gauge the potential liability, saying ‘customers might be entitled to claim that the advice was negligent’.

Speaking at an update to investors yesterday, Mischon de Reya finance disputes partner Guy Wilkes said he was now hoping to take a number of bondholder claims to the FSCS,’ the FT reported, after examining records of calls between company agents and customers.

He added that buyers had ‘clearly… had a raw deal’ and was received applause for saying ‘the system has clearly failed you’.

London Capital & Finance collapsed into administration this year with the loss of most of its £237 million in client assets, following years of complaints and warnings about the firm from the media and industry.

The FCA has launched an independent enquiry into how it handled warnings about the business, which advertised ‘secure’ 8% yields on investment and has become the subject of a criminal investigation.


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