FSCS publishes summary note regarding protected claims against London Capital & Finance

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Merely telling that happened after LCF became entirely legal on June 7, 2016 could be protected. FSCS knows that approximately 95 percent of current bondholders invested after this date. Further, so as to pay reimbursement, FSCS might have to be satisfied that a specific lien received information, relied upon this when investing, also suffered financial loss consequently. Claims will also have to satisfy the usual requirements under FSCS’s COMP rules, e.g. as to eligibility.
SURGE employed approximately 40 employees who functioned solely as representatives for LCF, using LCF domain addresses and contact information. These employees would deal with applications, whether accessible on the internet, by telephone or by email. All applications were checked by SURGE to get reasonableness/errors/signatures, before sending to LCF. Client queries were dealt with by SURGE.
FSCS’s analysis identified signs of controlled action where the Scheme considers LCF has accountability. The administrators’ report says:

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LCF has not yet been declared in default and FSCS is not yet accepting applications for payment.

The issuing of the mini-bonds from LCF wasn’t itself a controlled action, and on this basis, the mini-bonds hadn’t been promoted to shareholders like being FSCS-protected. However, following a number of allegations from the firm, such as in the administrators’ report, FSCS determined to investigate whether controlled activity was carried out (after June 7, 2016) which could contribute to compensatable claims. Several potential bases of claim have been considered internally, together with the FCA, and with external legal advisers.

SURGE is an internet marketing company, which, as it has been explained to people, facilitated information and application details obtained from potential Bondholders (and re-investors), before the receipt of monies from an investor. The combined administrators were informed by SURGE who John Russell Murphy introduced SURGE to LCF via Spencer Golding.

On December 10, 2018, the FCA issued a Supervisory Notice directing LCF to quickly withdraw its promotional material as the way LCF was advertising its own bonds was’misleading, unfair and unclear’.
FSCS has also requested LCF investors to complete a pre-application poll  to be able to assist the Scheme in building a better picture of the extent of advising.

LCF, which was originally set up in July 2012 as a commercial fund provider to UK businesses, sold mini-bonds from September 2013, using trading significantly increasing from 2015 onwards. As LCF just became completely accredited on June 7, 2016, FSCS security can just apply in relation to regulated activity carried out after this season.

FSCS’s evaluation identified a variety of instances where Surge went outside providing information to investors and made comments and value judgements that included a significant element of evaluation or Behavior, i.e. they gave advice. Even though the definition of advising has been narrowed for Part 4A consent purposes from 3 January 2018, the scope of FSCS protection was not changed and the Scheme remains able to protect advice with no personal recommendation. There was likewise misrepresentation of the security/risk of the mini-bonds and also their ISA status.
Ongoing investigations could provide evidence that LCF has accountability in relation to other regulated activities.

It is not possible at this time to gauge the amount or value of all potential telling asserts.
Claims in regard to advising will collapse to the expense intermediation levy class (Class 2), for which the yearly class levy limit is #330 million (such as a supplier contribution of 90 million). In the event the levies in an FCA financing class would exceed the annual limit for this class, the excess is levied more widely on another FCA courses as part of their retail pool.
Since the Scheme affirmed in its own update on June 28, 2019, its evaluation to LCF prospects FSCS to believe that some investors are most likely to possess compensatable claims. FSCS can pay compensation if a firm in default owes a qualified claimant a civil liability in relation to a regulated activity.
SURGE was responsible for the design and upkeep of the corporation’s site, investor portal and for the advertising and publication of the LCF financial products, via site comparison websites, internet search centers and general press articles”.

FinanceFeeds –
Though Surge is not itself regulated, because it was acting on behalf of LCF and under its management, the Scheme is satisfied that LCF has liability for the advising carried out by Surge. Surge was not an appointed representative, however FSCS is pleased that LCF is responsible for Surge in this respect, as Surge has been its representative acting with actual or ostensible authority and LCF is vicariously liable for Surge’s actions. LCF had few employees/staff, also all of direct contacts with investors were via Surge, which can be known to have had approximately 40 staff who worked only for LCF. Surge always kept out as LCF when communication with investors, e.g. by telephone and email. Sales were routed through Surge to LCF, such that investors would not have understood that they weren’t coping with LCF.
FSCS considered but rejected lots of controlled activities that would have resulted in all or the majority of investors with protected asserts.
“Role of Surge Financial Limited, otherwise known as”SURGE”