London Capital & Finance compensation scheme comes to an end

London Capital & Finance’s (LCF) compensation scheme ended on October 31, the Treasury has confirmed, after paying out £115million to investors in the bankrupt mini-bond provider.

The scheme, administered by the Financial Services Compensation Scheme (FSCS), was launched on November 3, 2021 to compensate investors after the fall of the LCF on January 30, 2019.

Read more: FSCS Keeps LCF Compensation Scheme Open After Deadline

Almost all eligible bondholders have now received compensation.

The Treasury said the FSCS may still be able to pay outstanding claims in exceptional circumstances, however, as the program has officially closed, these claims may take longer to process.

Read more: LCF administration costs to exceed £9m

The scheme paid out 80% of bondholders’ principal investment in eligible bonds, up to a maximum of £68,000.

Where bondholders had received interest on their bonds, distributions from the insolvency administrators, Smith & Williamson, or compensation from the FSCS for the LCF bonds, this reduced the amount of compensation payable under the regime.

Earlier this year, the FSCS extended the deadline for LCF bondholders to file a claim as it was awaiting documents from some remaining investors.

The compensation scheme has been described as an exceptional case by legal experts, as it is highly unusual for the Treasury to step in and reimburse investors.

Thomas Donegan, a regulatory partner at Shearman & Sterling, said LCF was unusual in that it was a Financial Conduct Authority-regulated company issuing very unusual bond instruments, holding just £50,000 of capital against an exhibition book of £200 million.

“LCF is not a case of lost investment and reduced returns – the public’s money has simply disappeared under FCA’s noses,” he said. News Peer2Peer Finance Last year. “It all comes down to the unique nature of LCF as a situation.

“Several of the other recent financial scandals involve unregulated companies or regulated companies outside the scope of the FSCS, such as payment service companies, which the government is unlikely to want to bail out. And failures of authorized companies should be covered by the FSCS. So I don’t see this sort of thing happening very often.