FCA amends Handbook to assist with LCF investor compensation
The UK Financial Conduct Authority (FCA) has made changes to its Handbook to assist the Financial Services Compensation Scheme (FSCS) Limited in administering the government-funded compensation scheme (the HMT Scheme) for London Capital & Finance (LCF) investors.
The FCA is applying existing rules in the Compensation sourcebook (COMP) to the HMT Scheme with some changes, rather than making new rules. These are:
- rules that provide for the automatic transfer of claimants’ rights to the FSCS when compensation is paid. This will enable the FSCS to pursue the failed firm or a third party where it is cost effective to do so, to try to recoup some or all of the compensation costs paid out; and
- rules to allow the FSCS to reimburse Her Majesty’s Treasury (HMT) if a claimant who has received compensation from the Government scheme become eligible for the usual FSCS Scheme (established by the Financial Services and Markets Act) and the FSCS determines that compensation is payable.
Last week, FSCS started to contact and offer compensation to bondholders who are eligible under the government’s LCF compensation scheme. FSCS says it will contact everyone as soon as possible and all bondholders will receive their offer by 20 April 2022.
If you receive compensation for any ISA investments you had with LCF, you can use this to make a single payment into another ISA without it counting towards your annual ISA subscription limit.
London Capital & Finance (LCF) was an FCA authorised firm which issued unregulated non-transferable debt securities, commonly known as ‘mini-bonds’, to investors and then speculatively invested the funds received in a number of underlying businesses. LCF went into administration in January 2019 and at the point of failure 11,625 bondholders had invested around £237 million.