LCF - Is My Money Safe? A Clear Case of Mis-selling Bonds

London Capital & Finance - Is Your Money Safe? A Clear Example of Mis-Selling

After the FCA Regulatory Notice about LCF published on 23 January many investors are focusing on the first part of the FCA statement that the bonds offered by London Capital & Finance were not ISA compliant so are now taxable.

If you are an investor in LCF Bonds worried about your investment then I would urge you to join London Capital Finance Action Group on Facebook. There is another Facebook group that may be linked to LCF themselves that many bondholders are reporting they have been blocked from and had their posts deleted.

Although this is obviously a key point for investors as it means they are liable to pay tax on the interest they have received from LCF and have effectively lost their ISA allowance for any years that they have contributed to the LCF ISA product, I don't think it's the most important part of the FCA notice.

The critical issue for many people is wondering if their investment with LCF is safe. The FCA notice makes it very clear that it is not and shows how misleading and badly mis-sold the bonds from LCF were. Adverts such as this highlight the extent that London Capital & Finance misled investors.

LCF - Is My Money Safe? A Clear Case of Mis-selling Bonds

Savers wanting a product that was equivalent to a cash ISA or cash savings account should never have put their money in to LCF bonds. LCF have admitted that their marketing was misleading and agreed with the FCA determination about them. It's unclear what can be done about this at the current time.

The FCA were very clear that the risks of investing in LCF bonds were not made clear, they should not have been compared to cash deposits or cash ISAs and they are a product with a significant risk of capital loss even if the company is run prudently. If the company is not run legitimately then this risk is obviously multiplied.

Any investor wanting to know if their money with LCF is safe will be sadly disappointed. Some people have concentrated on the FCA issue with marketing and assumed that all is well if the marketing is just reissued. This certainly isn't the case as the small print makes clear.

London Capital & Finance Risk warning - Is Your Money Safe?

As the FCA notice makes clear the bonds issued by LCF are high risk products that are not in any way comparable to a cash ISA and have the high risk of losing money due to the fact you are lending money via LCF to other companies and are an unsecured creditor of London Capital & Finance. The LCF literature skims over these risks which is why they have been so badly mis-sold to people who should never have bought them.

Many buyers of the LCF Bonds and ISAs thought they were cash savings. The vast majority would have been horrified if they'd known the bonds were higher risk than investing in the stock market and could lose all their money.

I reported LCF to the FCA back in 2017 as I could see the potential mis-selling happening already. It's incredibly frustrating that it took so long to act.

Nobody knows yet if London Capital & Finance is a ponzi scheme but FCA investigation should provide some answers. If new investors money was being used to pay back existing bondholder redemptions then that would not be a good sign.

The lending process that LCF claimed to operate was very different to the one they used in practice. It's publicly available information that LCF lent money to companies that were run by their own directors and their associates as well as companies that had never traded before and ones that have not traded in the last 3 years.

It's also public knowledge that LCF have failed to file their accounts with Companies House having delayed them using a loophole. Without seeing those accounts we have no idea on the current state of the company's finances but the deliberate delaying tactics certainly raise questions over the company when taken into account with their other actions.

The LC&F mini bond security is a certificate of debt or debt security, an IOU or corporate loan note issued to raise finance. It is unregulated, unprotected, non-convertible, un-tradeable and carries a significant risk so a return on investment and return of capital is not guaranteed. 

As an FCA unregulated financial product, the investor has no protection against losses under the Financial Services Compensation Scheme (FSCS) nor Financial Ombudsman (FO) which do not apply to such unregulated fixed term investments