LCF ‘censured’ over minibonds as City watchdog looks to turn page on ‘unjustifiable’ scandal
The UK’s financial watchdog will not impose a financial penalty on the now collapsed London Capital & Finance (LCF) for the misleading financial promotions of minibonds which left thousands of holders out of pocket.
The collapse of LCF was described by the Treasury Committee in the House of Commons as one of the “biggest regulatory failures in decades” with the FCA forced to enact a widespread cultural reform programme as a result.
The FCA said it would not impose a fine on LCF because it is insolvent and in administration, adding that “to do so would only divert funds that the administrators may use for the benefit of bondholder creditors.”
LCF used financial promotions to market high- risk products to bondholders, “many of whom were vulnerable”, said Therese Chambers, joint executive director of enforcement and market oversight at the FCA.
The FCA only stepped in a month before the firm collapsed to prevent the ads from being seen by consumers.
The company collapsed in 2019, which saw 11,000 investors lose £237m.
“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.”
Andrew Bailey, who led the FCA through the debacle, was forced to apologise to those who lost huge sums of money, saying he took full responsibility for the failings at the watchdog.
The now-Governor of the Bank of England did however downplay his role, saying he had barely heard of LCF until it had collapsed.
The company and those responsible may have been involved in knowingly defrauding bondholders, said the FCA.
In May, the former CEO of LCF was given a suspended sentence for breaching an asset freezing order and splashing hidden funds on holidays and hotel stays.