London Capital Finance - What Does FCA Notice on 23 Jan 2019 Mean?
FCA have published a notice about LCF on their website today giving details of the Supervisory Notice that was issued to London Capital Finance on 17th January. It confirms that the first Supervisory Notice was issued on 10th December 2018 shortly before the news was made public that all their marketing had to be withdrawn.
The key finding from the notice is this statement from FCA:
It also confirms that the ISA issued by LCF was non compliant so anyone who invested money in it is liable to pay tax on the interest received. This may be the least of their worries if the company continues to not be able to pay investors money back.
https://www.fca.org.uk/publication/supervisory-notices/second-supervisory-notice-london-capital-and-finance-plc-2019.pdf
I had not realised that the LCF bond was not ISA compliant but I had reported most of the other issues to the FCA back in 2017. It was clear that it was being advertised inappropriately as are other companies still selling now such as Blackmore Bonds.
The Supervisory Notice also gives details of the reasons why LCF were directed to remove all their marketing material.
The reasons come under 4 main headings
1) LCF bond was not ISA compliant
The key finding from the notice is this statement from FCA:
The FCA considers that LCF’s communications in relation to its “Fixed Rate ISA
or Bond” were misleading, not fair and not clear
It also confirms that the ISA issued by LCF was non compliant so anyone who invested money in it is liable to pay tax on the interest received. This may be the least of their worries if the company continues to not be able to pay investors money back.
https://www.fca.org.uk/publication/supervisory-notices/second-supervisory-notice-london-capital-and-finance-plc-2019.pdf
I had not realised that the LCF bond was not ISA compliant but I had reported most of the other issues to the FCA back in 2017. It was clear that it was being advertised inappropriately as are other companies still selling now such as Blackmore Bonds.
The Supervisory Notice also gives details of the reasons why LCF were directed to remove all their marketing material.
 |
| London Capital Finance - FCA Notice on 23 Jan 2019 |
The reasons come under 4 main headings
1) LCF bond was not ISA compliant
Products held in ISAs must have the ability to be transferred. As LCF bonds were not transferable then they do not qualify as an ISA. Other ISAs can all be transferred even if they are fixed rates, it may mean that you lose all your interest but you can move the ISA should you so wish.
2) FCA authorisation given undue prominence when the product was not covered
LCF only had FCA authorisation for selling loans to business. They did not have authorisation for selling bonds to consumers. They were unregulated for that and FSCS protection does not apply.
The LCF website had a very clear bullet point that they were FCA regulated. This was irrelevant for the products being sold to consumers.
LCF only had FCA authorisation for selling loans to business. They did not have authorisation for selling bonds to consumers. They were unregulated for that and FSCS protection does not apply.
The LCF website had a very clear bullet point that they were FCA regulated. This was irrelevant for the products being sold to consumers.
3) Past performance warning insufficiently prominent
The details given highlight the 100% track record. No mention until small print about past performance not being a guide to the future.
Many people have asked if their money is safe with LCF. Sadly this point has highlighted something I've mentioned all along and been accused of scaremongering when I said that the money was NOT safe. FCA have confirmed what I've said and the reason why I reported LCF back in 2017 as the bond was being sold to people who thought it was a safe cash account.
The details given highlight the 100% track record. No mention until small print about past performance not being a guide to the future.
Many people have asked if their money is safe with LCF. Sadly this point has highlighted something I've mentioned all along and been accused of scaremongering when I said that the money was NOT safe. FCA have confirmed what I've said and the reason why I reported LCF back in 2017 as the bond was being sold to people who thought it was a safe cash account.
4) Inappropriate comparison with cash savings
The adverts appeared alongside cash ISAs with no distinction. They were clearly being used to suggest it was equivalent to a bank deposit
The adverts appeared alongside cash ISAs with no distinction. They were clearly being used to suggest it was equivalent to a bank deposit
It's interesting that FCA have made no mention of the fact that many people assume ISA = CASH ISA and thought they were buying one not an investment ISA. The widespread use of the word ISA on its own is also misleading regardless of whether the ISA wrapper was valid or not.
LCF have been told they can appeal the decision but have agreed with most of the points made
LCF have been told they can appeal the decision but have agreed with most of the points made
Thank you for you comment on the latest FCA publication.
ReplyDeleteDo you think after this we can consider LC&F is mis-selling their ISA product? Since bondholders are misinformed about the nature of LCF bonds (not transferable)
As a result would it be a valid reason to claim this part of the investment back? What would FCA do if we were mis-sold? Thanks
Alan
The problem is that the ISA/bond is an unregulated product so FCA have no jurisdiction over it. It's certainly likely that many people who bought the ISAs were mis-sold but I would suspect that the only way to get money back would be to sue LCF. It was clearly shown as not being FSCS protected so the only other option would be if FCA directed LCF to compensate customers. That would only be viable if they had the money to do so which I suspect isn't the case.
DeleteIt's a really good point though so I'll look at writing in more detail about it