FCA censures ‘unfair and misleading’ promotions for failed £237m bond scheme

Nearly 12,000 people saw their savings trapped when the London Capital and Finance scheme collapsed in 2020.

£237m of investors’ money was trapped when the London Capital and Finance bond scheme collapsed (John Walton/PA) (PA Wire)

The City watchdog has censured collapsed bond scheme London Capital and Finance (LCF) for “unfair and misleading” promotions, but let it off without a fine.

The Financial Conduct Authority (FCA) said fining the business would simply divert away money that could otherwise go to long-suffering investors.

LCF collapsed in early 2020 after it was unable to meet the payments it had promised to bondholders.

The company promised high returns on investments in its bonds. It said the funds raised – around £237 million at the time of its collapse – were being invested on bondholders’ behalf.

However, after it collapsed, around 11,600 people, many of them saving for retirement or already retired, were unable to get their money back.

Some were able to get payments from the Financial Services Compensation Scheme (FSCS), but most were not eligible, causing the Government to step in with a special fund to bail out the savers.

On Wednesday, the FCA said LCF’s promotions “presented a misleading picture” which made its bonds “appear a far more attractive investment than they were”.

They were not told about hidden charges, and the high risk involved, the FCA said.

The FCA said LCF also used investors’ money to fund “seemingly independent comparison websites” which showed its bonds next to other investments with lower rates of return.

LCF’s use of financial promotion led to bondholders, many of whom were vulnerable, investing in unsuitable, high-risk products

Therese Chambers, Financial Conduct Authority

Therese Chambers, joint executive director of enforcement and market oversight, said: “LCF’s use of financial promotion led to bondholders, many of whom were vulnerable, investing in unsuitable, high-risk products.

“We recognise our censure will not provide solace to those investors who lost out. But it is important we set out what went wrong at LCF and how their promotions misled people into parting with their money.”

The Serious Fraud Office is currently investigating whether to bring fraud charges against those who ran LCF.