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Collapsed mini-bond firm’s Google adverts under the spotlight

Collapsed mini-bond provider London Capital and Finance saw more than £20m-worth of promotions appear on Google before it went under and was investigated by the FCA, a report in the Times claims.

LC&F contracted digital marketing firm Surge Group to help raise investor funds, the Times says, which targeted the search engine giant in a £20m advertising push, according to the paper.

The Times quotes a source close to the situation as saying Surge received 25 per cent commission on the roughly £237m it raised from investors on behalf of LC&F, having spent around £26m doing so.

Some 90 per cent of the marketing budget went towards Google advertising.

Other LC&F marketing initiatives included sponsoring the Osborne Horse Trials in Cowes.

FCA: Review into collapsed mini-bond firm should include Isa regime

Last week, Money Marketing reported increasing investor frustration over their wait for compensation from LC&F losses.

Investors claim that the firm used terms such as “secured bond” in its marketing literature, giving the impression of security.

Promoting mini-bonds is not a regulated activity, so the Financial Services Compensation Scheme has said some investors may not be entitled to claim on the lifeboat fund.

However, an administrators report from the end of March says that liquidators are still looking into the possibility that some LC&F representatives did in fact give advice, which means some claims could be covered.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. My understanding is you can be imprisoned and / or fined for giving financial advice without being authorised. If somehow it is felt or can be proved that this was happening then surely it is a matter for the police not the FSCS. If this wasn’t the case then every dodgy adviser or fraudster could provide advice knowing the compensation scheme would still have to pick up the tab come what may.

    • If a dodgy adviser or fraudster works for an FCA-regulated company they can do exactly that.

      The FSCS has confirmed that it does not matter whether the regulated company in question is authorised to give advice or not – if it gave advice and a claim arises then it is covered by the FSCS.

      As yet nobody has publicly confirmed that they received financial advice from LCF and have successfully claimed on that basis.

      • Christopher Petrie 17th June 2019 at 1:43 pm

        That argument doesn’t stand up and the FSCS hasn’t said that anyway.

        If that argument stood, anyone working for, say, a bank as a cashier could give some mad advice in the pub and when it went wrong the investor could claim against the bank.
        No they can’t!

    • Yes. The FSCS should not be able to pay out for unauthorised “advice” or it destroys the integrity of the regulated activities order. That in turn means that there is no point having “regulated advisors” and the whole regulatory rationale collapses in on itself.

      Exactly what the “advice” is is also going to be a problem. We all know in these boiler rooms it’s bullying, cajoling and encouraging people to make an investment. In all probability it will involve one or many untruths being told.

      But that is not “advice” as we know it. Formal, personal recommendations in the light of the clients circumstances and needs. I thought we’d been round this pointless circle already with Pensionwise and its guidance.

      I will accept that advice and guidance appears to be self-absorbed esoterica and to the punter (who is, let’s not be mealy mouthed about it, invariably an effing idiot), “go on, you’ll not regret this investment” sounds like “advice” or even “expert advice”. Equally, to an MP, (same parentheses apply), they think its the same too so that when they wade in with their virtue-signalling twopennorth their ranting just muddies the waters more. Before they know it, MPs have said the wrong thing and end up committing the FSCS or taxpayer to millions.

      So it’s a tough battle to fight when you argue that “advice” involves fact funds, reports, PI cover, FSCS eligibility etc. The FCA have manfully tried to argue this in the past, but given the fact that their face is in the omelette shop and MPs want Mr Bailey hanging from Tyburn, some very unpleasant, and unpredictable outcomes could emerge from this case which end up changing the genuine advisory landscape forever.

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