The 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.”
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.
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.