LCF Investigation Bondholders - 23 January 2020 Meeting Update

On 23rd January 2020 a bondholder meeting took place in London where evidence was heard for the Investigation into London Capital & Finance by Dame Elizabeth Gloster giving bondholders the opportunity to provide their experiences of their interactions with FCA. The investigation is specifically into the role of the FCA in the regulation of LCF.

The meeting was live streamed and lasted approximately 3 hours. A large number of investors were able to give their evidence to the team and many repeated a lot of familiar points. Quite a few people did seem slightly confused about the role of the enquiry and were posing questions that were outside the scope of the review and expecting answers there and then. There were some very well reasoned points and a few specific issues raised that are worth highlighting.

You can view and listen to the full event on the investigation website here

LCF only failed due to FCA Action in Dec 2018

There are some investors (or possibly stooges) who are still claiming that LCF would still be paying out interest now if it wasn't for the FCA shutting them down in 2018. This might be technically true for a short while but any Ponzi scheme that relies on new money to pay back existing investors will eventually fail. The LCF business model of paying 25% commission and lending money to companies with no means to pay it back was not sustainable.

Insurance Policy in Place for LCF

One investor claimed that LCF staff informed him that an Insurance policy was in place so if anything went wrong they'd be able to claim their investment from it. This is a familiar tactic of other mini bond providers such as Blackmore who also promote having an insurance policy to cover investors but it's the first time I've heard it mentioned in relation to London Capital & Finance.

FSCS Misleading & Incorrect Advice

One investor had specific information from FSCS that LCF was protected by FSCS compensation. This appears to be a more unusal occurrence but is a very serious issue if FSCS is not giving correct information when a query is raised on a specific firm

LCF Investor Due Diligence

One speaker said that they had done due diligence before investing in LCF. Despite their claim of their financial experience their definition of Due Diligence is obviously very different to mine.

Any Google search of LCF would have brought up multiple threads on different forums that were highlighting the issues and reasons why LCF was a risky proposition that was not FSCS protected. Whether these were ignored or not they were certainly very prominent for anyone who did even the most cursory bit of research about the company.

The speaker also claimed to have read the Information Memorandum, if they had done so they would have seen this clearly on page 3 "THESE BONDS ARE NOT REGULATED BY THE FCA AND ARE NOT PROTECTED UNDER THE FINANCIAL SERVICES COMPENSATION SCHEME." There is also this statement "LC&F has issued this Information Memorandum. Investing in LC&F’s Bonds is speculative and involves a significant degree of risk."

While I have every sympathy with someone investing that took LCF promises at face value, anyone who claims that they performed due diligence before investing and still thought they were FSCS protected is being very selective with their memories.