New documents have revealed how the Financial Services Compensation Scheme determined if “advice” was given to investors in the case of collapsed firm London Capital and Finance.
The FSCS noted that “advice does not necessarily mean that a personal recommendation – such as ‘you should invest’ or ‘I recommend that you invest’ was made”.
The lifeboat fund added: “However, there needs to be more than just the provision of information for it to count as advice.”
Last week, the FSCS concluded that some investors did receive advice from LC&F, after several months of investigation in cooperation with the administrators and the FCA.
Within its investigation, which launched in January, the FSCS asked investors to describe “information or advice” they received from the representatives of LC&F or digital marketing company Surge Financial, and whether it influenced their decision.
Examples of information or advice that may have influenced your decision to invest might include:
- comments on the pros and cons
- comments on merits of the investment, such as assurances over the security of the underlying assets of the bonds themselves
- comments/value judgments on the quality of the investment (e.g. ‘this is an excellent product offering a fantastic rate of return’).
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, which said it will not accept claims against the firm.
However, administrators, at Smith and Williamson, highlighted in their report from the end of March that some LC&F representatives – who were otherwise trained not to provide investment advice – may have given advice in some instances.
The process included listening to calls between the LC&F representatives and the investors.
Last week, the FSCS confirmed that some investors could be due redress after it concluded advice was provided in some cases.
The investigation is ongoing.