Chair of the Treasury Select Committee, Nicky Morgan, has written to the Financial Conduct Authority (FCA) demanding a full-blown investigation into regulatory failures around the collapse of London Capital & Finance (LCF), which was discussed in a blog last month. Effectively, the Chair warns the FCA that if they refuse to launch such a probe, she will urge the Treasury to force it to.
LCF, which sold mini-bonds and Individual Saving Accounts (ISAs), collapsed in January, leaving 11,000 mainly elderly investors facing the loss of almost all their money. Many of these investors had been lured in by the offer of interest rates of up to 8 per cent and in their advertising, LCF appeared to be targeting older, less financially aware people.
The FCA was warned in 2015 and 2017 about risks around LCF but failed to act until December of last year when it ordered the firm to cease its ‘misleading’ advertising. However, by then the public had invested £236 million in its bonds.
The Serious Fraud Office has now announced that it has arrested four people in association with the collapse and has launched a full enquiry. It has also been confirmed that one of the businesses LCF lent to, London Oil & Gas, has now collapsed into administration. This business had in turn, invested £40 million in Independent Oil & Gas which, according to LCF’s administrators, could be the only money bondholders are likely to get back.
The collapse has attracted widespread media attention and has featured several times on the BBC’s Money Box programme on which Milsted Langdon’s Forensic Partner Roger Isaacs was interviewed for comment. He explained to listeners that there could have been a deliberate attempt to obfuscate what was happening by delaying the filing of accounts.
He said: “The calls for an official investigation in London Capital & Finance is welcome because it is difficult to understand why it took so long for the FCA to act.
“The administrators will undoubtedly be undertaking a detailed forensic investigation to trace where investors’ money has gone but finding it will be only the first step. The next challenge will be to try to recover as much as possible and the early indications are far from promising.”