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FSCS writes to 700 more LCF investors

FSCS writes to 700 more LCF investors

The Financial Services Compensation Service has contacted an additional 700 London Capital & Finance investors in regards to compensation.

In an update today (February 2) the lifeboat scheme said to date it has contacted just under 8,500 investors paying out £105mn in compensation on 11,500 bonds.

However, it still has 700 more investors to get in touch with.

The FSCS re-iterated its promise that all bondholders will receive an offer of compensation on behalf of the government by April 20 this year.

These payments are processed as part of a government redress scheme which was launched in November and pays 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.

LCF collapsed in 2019 owing more than £230mn, putting the funds of some 14,000 bondholders at risk.

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 FCA’s handling of the collapse was branded “one of the largest conduct regulatory failures in decades” by the Treasury committee, which urged the FCA to implement a change in culture to protect consumers and financial markets.

A report by Dame Elizabeth Gloster published in December 2020 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 Gloster made in her review.

sally.hickey@ft.com