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

FCA officeThe FCA says the broad investigation in to the collapse of mini-bond firm London Capital & Finance should include the Isa regime.

In FCA board minutes from 28 March the regulator’s non-executive directors discuss how best to follow-up in the wake of the high profile collapse of LC&F which had around 11,500 customers who lost a total of over £237m.

LC&F’s fell in to default in January. The regulator has invited HM Treasury to direct the FCA to commission a review in to the regulation of mini-bonds and the failure of LC&F.

FCA to be investigated over supervision of failed mini-bond firm

The minutes state:

“The non-executive directors noted that there was a significant risk of harm to consumers from these unregulated activities and considered that any investigation should examine the LC&F case in the context of these broader questions.

“They also considered that the review should be wide ranging and consider all relevant factors, such as the individual savings account regime.”

LC&Finance promoted the mini-bonds offering 8 per cent annual returns in an Isa and emphasised the company’s FCA authorisation.

In December last year the FCA issued LC&F with an order to take down promotional material of the bonds, ruling they were “misleading, not fair and unclear”, as they were not eligible for Isa status as claimed.

Four arrested as Serious Fraud Office probes collapsed mini-bond provider

The board agreed there was a risk attached to how it deals with such authorised firms:

“… regulation directed only to authorised firms that issue unregulated mini-bonds may cause this activity to migrate further to unregulated entities.”

The non-executive directors concluded there was not sufficient information yet to say if the conditions for a regulatory failure investigation had been met. This would involve there having been a serious failure in the regulatory system or in the operation of that system. However, they agreed the investigation should be carried out on the grounds of public interest.


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