FCA to face independent investigation into London Capital & Finance collapse

By Daniel Lanyon on Tuesday 2 April 2019

Editor's PickAlternative Lending

Several thousand retail investors are set to lose money in the fiasco.

The UK financial regulator the Financial Conduct Authority (FCA) will face an independent inquiry into its oversight of the failed mini-bond firm London Capital & Finance.

In a meeting late last week, the FCA says its board agreed with govermentall calls that there should be an investigation “by an independent person” into the failure of London Capital & Finance, which collapsed leaving retail investors out of pocket to the tune of £230m.

The investigation will cover questions in two areas. The FCA’s supervision of LC&F and whether the existing regulatory system adequately protects retail purchasers of mini-bonds.

“The Board decided that the FCA should ask the Treasury to use its formal powers to direct the FCA to commission this review, as this will ensure that the review has a broad and comprehensive remit,” The FCA said.

Mini-bonds are unlisted, unregulated debt securities. They are non-transferable and illiquid and at least 11,600 mini-bond holders who were attracted by LCF’s punchy  9 per cent  yields and supposed ISA eligibility. Marketed as a “fixed-rate ISA”, the mini-bonds it later transpired could not be wrapped in an ISA. They are now facing collective losses of £236m as administrators scramble to recover assets. Less than a fifth is expected to be recovered.

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