London Capital & Finance Compensation Coming - LCF Update

 The Bill to pay compensation up to 80% of investment value for London Capital & Finance investors has now passed all the stages in the House of Commons and the Lords and received Royal Asset so can now be implemented by the government.

As previous outlined the compensation will cover up to 80% of the maximum FSCS cover of £85,000 so anyone who invested that amount will receive a total of £68,000. This total will include any interest and dividend already paid by the administrators.

Anyone who invested over the FSCS limit will also be capped at £68,000 compensation which could result in major losses for some investors. However it would appear the government has decided it would be unfair to compensate for losses above that level when the FSCS limit has been widely known and this investment was not covered by FSCS anyway as an unregulated product.

The Bill states that compensation will be paid within six months of it being passed so investors should receive their money by the end of April 2022. There is nothing investors need to do at the moment but be very wary of any messages claiming you need to pay any fees to access your compensation - these are scams regardless of how they are dressed up.

London Capital & Finance Compensation-When paid?

It is still unclear what will happen with the recoveries by the administrators and whether any of those payments will be allocated to investors or to the government to cover the compensation bill. There are a couple of possible scenarios that may be of benefit to larger investors only.

1) If the recovery from LCF assets by the administrators is over 80% then any excess above that level could be used to top up the money from the government. This seems unlikely in the extreme as the administrators have suggested recovery will be around the 25% level.

2) If recovery is around 25% then investors with amounts well above the FSCS limit may be entitled to additional funds. If you invested over £300,000 with LCF then this might apply as the 25% of your investment would be more than the compensation paid by the government at £68,000.

This is pure speculation in the absence of any details from the government and would seem to be a fairer way to treat the larger investors that are capped by the FCSC limit.

If recovery is around 25% as anticipated then anyone at the FSCS compensation level wouldn't receive any additional funds.

3) Something else? Is there another compensation option you think is possible? Please comment below.

LCF Compensation - When will it be paid out to investors?