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FSCS apologises for misleading clients of collpased mini-bond firm

FSCS-Piggy-Bank-500x320.jpgThe Financial Services Compensation Scheme is investigating after its communications with London Capital & Finance customers could have misled them to believe their investments with the mini-bond provider was FSCS-protected when it was not.

The Financial Times has highlighted a number of cases where LC&F prospective investors believed they had received FSCS assurance their investments would be protected by the scheme.

An FSCS spokeswoman tells Money Marketing: “We are sorry for the confusion this may have caused some LC&F customers.”

Nicky Morgan tells FCA to investigate regulated status after collapse of mini-bond firm

FT cites one particular instance of an investor recieving an email from the FSCS last August stating:

“London Capital & Finance Plc are authorised by the Financial Conduct Authority and therefore covered by the FSCS up to the compensation limit of £50,000.”

The email fails to mention the fact LCF’s unregulated activities, such as issuing minibonds, are not not covered by the mentioned limit.

The FSCS acknowledges its incomplete picture may have led to confusion and apologised.

Collapsed mini-bond investor money traced to four men

An FSCS spokeswoman says:  “We have been made aware of a small number of communications from the FSCS which may have given a partial picture and we are seeking to establish the number and nature of their content.”

She adds: “While it is true to state that FSCS protection would cover regulated activities carried out by LC&F, we accept these efforts to inform people may have led to confusion about the extent to which our protection extends to these particular minibonds.”

LC&F defaulted in January, leaving over 11,500 investors with a total loss of £237m. After a big volume of claim queries, the FSCS issued a statement on its website on 6 March, saying that it is not accepting claims against the firm.

Administrators, at Smith and Williamson, say in their report from the end of March that some LC&F representatives – who were otherwise trained not to provide investment advice – may have in fact given advice in some instances.

The administrators say they are working with investors and FSCS, listening to records of call conversation to establish where the advice may have been given which could make the investor eligible for claim.

The FSCS spokeswoman tells Money Marketing that as part of the investigation, FSCS will examine each of the individual cases and respond to them directly, but she says there is no more information on whether people, who were confused by the FSCS communication, would be more likely to be found eligible for a claim.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. The F-pack and the FCA in particular are very exacting of preciseness from us, their subjects, whilst being fundamentally as sloppy as mud with their own.

    There was the “DB benefits are guaranteed” cockerel-up; I see the FCA’s “if its regulated by us you’re covered” message still going out; and I call certainly believe these messages going out from from the FSCS.

    Personally, its a absolute disgrace and a lot of heads need to roll until they get the communications out that are clear unambiguous and watertight. Anything else is REALLY worse than useless. Silence is better than rubbish. If I ever hear “sorry, but when we said x, we really meant y” again and not find it accompanied with a swathe of sackings I shall run for parliament and administer them myself.

    What it tells you is that the F-Pack think they are God, when in fact they are anything but; and that their staff collectively don’t really have much of a clue what they are actually saying. Having a degree in English from the University of Dronfield might make you feel that you can express yourself clearly, but in this world of finance, being precise is that only watchword.

  2. Julian Stevens 7th May 2019 at 4:50 pm

    Yet elsewhere we read that lawyers acting on behalf of the victims are urging the FSCS to consider paying out (as usual, with OPM). What a mess.

  3. Martin Martin 7th May 2019 at 6:01 pm

    An FSCS spokeswoman says: “We have been made aware of a small number of communications from the FSCS which may have given a partial picture and we are seeking to establish the number and nature of their content.”

    Brilliant, their apology suggests that it’s all a bit of a storm in a teacup, with “small’ consequences. Can each of them cough up enough of their salaries/bonuses/pension contributions to cover the “small” losses that their negligence has caused? They’ll hardly feel the pain as the losses are only small (in their words) – averaging about £50,000 for each mistake made?
    Take it from us lot who have to pay for the whole thing, you’ll get used to funding other people’s negligence/ fraud/whatever, so not to worry.

  4. Philip Castle 7th May 2019 at 6:23 pm

    So who at the FSCS will take responsibility for that mistake? Was it a training issue?
    If the minimum requirement until deemed Competent is R01/equivelent and the full level 4 has to be obtained within 2 years of advising as I think is the case, surely anyone at the FSCS who is allowed to write to consuemrs directly coudl be expected to meet the same standards as us crudy old financial advisers.. oh I forgot, they probably all have degrees from a Uni…… in basket weaving.

    • Philip Castle 7th May 2019 at 6:26 pm

      Despite my spelling and typing errors, I wish it to be known I actually have a B at GCE English Language and C at English Lit from my Grammar school from 1983. The only GCE resit I had to do and passed second time was Chemistry, but I am afraid that despite 3 attempts I didn’t pass French.

  5. Whoa, whoa, whoa, hold the phone.

    If one of my advisers inadvertently gives a misleading message to a client that leads to a poor outcome, we are liable and have to pay up.

    There is no reason why the same should not apply to the FSCS.

    Get your cheque-books out, boys, and feel what it’s like on the other side of the fence for once.

    • Philip Castle 8th May 2019 at 8:18 am

      Yes, but the staff and directors will not pay, the FSCS levy will i.e US. Hence why there needs to be a head rolling and confirmation that staff have to be qualified before they email a consumer directly. Effectively it could be argued the individual has given advice as they have commented on a specific company and the consumer has acted on that advice of incorrect facts. They were not given “guidance” a statement in writing was made about a specific company BY an employee of the FSCS and in writing so no denying that they did and that it was a misunderstanding.

  6. Methinks they have made everything around regulation so complex that even the regulators don’t understand it!

    C’est ridicule!

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