London Capital Finance Update - FSCS Offers Compensation to Investors
The Financial Services Compensation Scheme has today announced that some investors in London Capital & Finance (LCF) will be offered compensation by the FSCS. However this only applies to a very limited group of investors in LCF bonds that transferred Stocks and Shares ISAs to LCF.
Out of a total of around 11600 investors only 159 are covered by this compensation announced by the FSCS today. These 159 investors will receive their compensation by the end of February 2020. This will cover any investments up to £85,000. Any money beyond that is likely to be lost. Other investors in LCF may only see 20-25% of their money returned according to the Administrators.
There are 3 different types of ISA. Although most people assume an ISA is a savings account, it isn't. It's actually a tax free wrapper that can hold cash but it can also be used to hold shares and investment funds (S&S ISA) and unregulated bonds (Innovative Finance IF ISA).
The compensation from FSCS awarded to investors who transferred a Stocks & Shares ISA is based on technical regulatory permissions in that a FCA regulated company has to authorise the sale of stocks & shares as part of the transfer and that process is therefore covered from a regulatory perspective. As S&S ISA holders had to sell their existing shares to transfer across to LCF then LCF were considered as the authorised party for that process when they held FCA authorisation in their own right after 2016. This is why investors prior to 2016 do not qualify even if they transferred a S&S ISA as LCF was not authorised at that time.
Cash ISAs do not involve the sale of investments so are not protected in the same way.
Anyone who transferred a cash ISA to LCF is not eligible for FSCS compensation under this ruling but some cover may be offered to those who were given advice by LCF or Surge staff.
This was covered in one of our blog posts back in March 2019
Evening Standard has reported on this story here
Out of a total of around 11600 investors only 159 are covered by this compensation announced by the FSCS today. These 159 investors will receive their compensation by the end of February 2020. This will cover any investments up to £85,000. Any money beyond that is likely to be lost. Other investors in LCF may only see 20-25% of their money returned according to the Administrators.
Why are only S&S ISA investors going to be compensated by FSCS?
The compensation from FSCS awarded to investors who transferred a Stocks & Shares ISA is based on technical regulatory permissions in that a FCA regulated company has to authorise the sale of stocks & shares as part of the transfer and that process is therefore covered from a regulatory perspective. As S&S ISA holders had to sell their existing shares to transfer across to LCF then LCF were considered as the authorised party for that process when they held FCA authorisation in their own right after 2016. This is why investors prior to 2016 do not qualify even if they transferred a S&S ISA as LCF was not authorised at that time.
Cash ISAs do not involve the sale of investments so are not protected in the same way.
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| London Capital Finance FSCS Offers Compensation to Investors |
This was covered in one of our blog posts back in March 2019
Evening Standard has reported on this story here
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