London Capital & Finance entered into administration at the end of January, putting the funds of more than 14,000 bondholders at risk.
Shortly before the collapse the Financial Conduct Authority ordered London Capital & Finance to stop marketing its fixed-rate investment bonds and Isa products and the provider had its assets frozen by the regulator.
The FCA alleged the Tunbridge Wells-based firm had signed clients up to fixed-rate Isas promising 8 per cent interest, with investors' capital then invested into mini-bonds used to issue loans to small businesses.
There were concerns the 14,000 clients of the firm may not have fully understood the nature of the investment they were making due to unclear marketing material.
As unregulated investments, London Capital & Finance did not need to be authorised by the FCA to issue the mini-bonds but it did need to be authorised to issue the promotion of the mini-bonds.
In a statement on its website today (March 6) the FSCS confirmed it would not be accepting claims against the insolvent company because mini-bonds are unregulated investments and therefore not protected by the compensation scheme.
However, the scheme advised if it became aware of circumstances that "give rise to potentially valid claims" it would begin to accept applications against London Capital & Finance.
The statement read: "If this happens, we’ll communicate this to customers on our website.
"We’re working closely with the administrators to understand more about how the firm carried out its regulated activities."
At the end of January Finbarr O’Connell, Adam Stephens, Colin Hardman and Henry Shinners of Smith & Williamson LLP were appointed as joint administrators of London Capital & Finance, with a dedicated helpline and email address set up for affected parties.