Why was FCA Action Taken against London Capital & Finance?
A lot of concerned investors are asking why did the FCA act to stop LCF marketing their bonds and then stop the company from dealing in their assets and freeze their bank accounts?
The information below was published on 9th January and has proved to be an accurate summary of why the FCA acted although I'd not spotted the invalid ISA issue. In addition I suspect that further to these reasons once LCF had got to the size of £200 million plus it was becoming too big to ignore. Guaranteed returns of 8% just aren't possible long term so FCA must have known that something was going on with the way LCF was operating and that's why they announced they were freezing the LCF assets and bank accounts. In order to generate 8% interest the capital has to be significantly at risk so investors expecting security will be disappointed. As these seem to constitute the majority of bondholders the FCA had to prevent the situation getting worse and prevent more sales.
More info on the promotion of high risk mini bonds here from Evening Standard
|The LCF bonds were being marketed to retail investors without the risks being fully explained|
In their accounts of 2017 (later accounts have been delayed from filing by LCF) it shows there were only 11 companies that were given loans. From the number of companies identified by various people it looks like most of these are linked to LCF.
5) Security Trustee issues
The details given to investors was that they were protected by an independent security trustee looking over their investment, GLOBAL SECURITY TRUSTEES LIMITED, Company number 09846126. This company does not appear to be independent as it is registered to the same address as London Capital & Finance and the director until recently was the same as LCF. The company is shown as dormant with only £100 of assets so it's unclear how it can take any action for investors especially as it has been run by the same directors.
7) Breaches of Legal reporting requirements