All eligible London, Capital & Finance (LCF) bondholders will be contacted with an offer of compensation within six months of the government’s redress scheme going live this week.
In an announcement yesterday (November 3), the Financial Services Compensation Scheme confirmed it will administer the redress scheme on behalf of the government.
Bondholders will be contacted by the lifeboat scheme by April 20, 2022, with payments expected to begin later this month.
The scheme launched yesterday after it was first announced in April that the government would pay 80 per cent of bondholders’ principal investment in eligible bonds, up to a maximum of £68,000.
But the amount of compensation due to individuals will be reduced if they have received interest on their bonds, distributions from the insolvency administrators (Smith & Williamson) or prior compensation from the FSCS.
The government stated: “Where bondholders accept the offer of compensation under the scheme, FSCS will automatically take over all remaining rights they might have against LCF. This means that bondholders won’t be able to make their own claim in the insolvency of LCF, except in certain circumstances.”
Individuals have six months to accept an offer of compensation otherwise they will give up their right to compensation unless there are exceptional circumstances, the government added.
LCF entered administration in 2019 owing more than £230m and putting the funds of some 14,000 bondholders at risk.
A report by Dame Elizabeth Gloster published in December found 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 was “very sorry for the errors we made in our handling of this case” and that it was committed to implementing each of the recommendations Dame Gloster made in her review.
In June, the Treasury committee labelled the Financial Conduct Authority’s handling of London Capital and Finance “one of the largest conduct regulatory failures in decades” and urged the FCA to implement a change in culture to protect consumers and financial markets.
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