FCA censures London Capital & Finance over mini-bond promotion
The FCA opted for a censure, arguing it was inappropriate to impose a financial penalty on an insolvent firm.
The watchdog today (11 October) said it had opted for a censure, as it was inappropriate to impose a financial penalty on an insolvent firm.
LCF is also in administration, meaning a penalty would divert funds away from being used for the benefit of bondholder creditors.
About 11,000 investors lost a total of £237m in LCF's mini-bond scheme between 2014 and 2019 — a situation which saw the FCA face significant criticism in an independent investigation. Financial promotions were used to market mini-bonds to retail investors, which the FCA said «presented a misleading picture of the mini-bonds and made them appear a far more attractive investment than they were».
«LCF's use of financial promotion led to bondholders, many of whom were vulnerable, investing in unsuitable, high-risk products,» said joint executive director of enforcement and market oversight Therese Chambers.
Investors in LCF were not told of the true nature of what they had invested in, including extra and hidden charges, and what the regulator deemed the «high-risk and unsustainable nature of the lending being carried out».
Chambers said: «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.»
On the back of the LCF scandal, the regulator put in place investment of £98m to strengthen its data analytics in a bid to more quickly identify problematic firms. This was followed by the 2020 ban of mass-marketing of speculative illiquid securities, such as mini-bonds, to retail investors.
The compensation
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