Financial Services Compensation Scheme  

LCF victims given go ahead on Isa contributions

LCF victims given go ahead on Isa contributions

London Capital & Finance Isa investors have been told they can re-inject their FSCS compensation payments into an Isa without exceeding their allowances.

In an update yesterday (April 26), the Financial Services Compensation Scheme said HM Revenue and Customs has contacted customers who held Isas with LCF to let them know that it has reviewed its position following the submission of new evidence.

Investors will be able to use compensation paid to them by the FSCS in respect of their LCF Isa to make a ‘defaulted investment subscription’ within 180 days of receiving that compensation.

This subscription will not count towards the £20,000 annual Isa allowance.

The FSCS said investors should contact their Isa manager and will need to show the decision letter they received from the FSCS plus evidence they held an LCF Isa.

The FSCS also clarified that if an investor has already spent their FSCS compensation or re-invested it elsewhere, they can use any funds up to the same amount.

LCF entered administration in 2019 owing more than £230m and putting the funds of some 14,000 bondholders at risk.

Last week (April 19), the government set up a compensation scheme for LCF victims through which it will reimburse individual bondholders up to £68,000. 

The government-funded scheme will be available to all LCF bondholders who have not already received compensation from the FSCS and represents 80 per cent of the compensation they would have received had they been eligible for FSCS protection.

On the same day, the Financial Conduct Authority said it would pay compensation to a small number of LCF investors who complained about the regulator’s handling of their case.

It followed a report by Dame Elizabeth Gloster published in December which warned the FCA had shown "significant gaps and weaknesses" in its policies and practices ahead of LCF's collapse.

The investigation also found the regulator could have done more to protect investors in LCF and its handling of information from third parties regarding the business was "wholly deficient".

The FCA said it is “very sorry for the errors we made in our handling of this case” and said it was committed to implementing each of the recommendations Dame Gloster made in her review.

amy.austin@ft.com

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