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UK compensation scheme probing LCF scandal to assess investors' bid for claims

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UK compensation scheme probing LCF scandal to assess investors' bid for claims

The U.K.'s financial compensation scheme is probing whether investors in collapsed British commercial lender London Capital & Finance PLC are eligible for compensation or not, increasing bondholders' hopes of retrieving some of their investment in the firm, the Financial Times reported May 10.

Investors feared losing most of their investment in LCF, which filed for administration in December 2018 after the U.K. Financial Conduct Authority ordered it to stop conducting any regulated activities and to withdraw promotional materials for the so-called mini-bonds, deeming the marketing materials "misleading, not fair and unclear."

The Financial Services Compensation Scheme previously said that the mini-bonds, which were in some cases billed as tax-free individual saving accounts, were issued "on a nonadvised basis" and as a result were not protected under its scheme. However, it is now investigating whether any regulated activities were conducted during the process which might support bondholders' bid for claims, the report said.

Any evidence revealing that LCF salespersons advised bondholders to buy mini-bonds could make investors eligible for an amount up to £50,000 under the industry-funded compensation scheme, the FT previously reported.