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Lessons from London Capital & Finance

One of the last decade’s more infamous financial scandals has finally reached a conclusion.

The name of London Capital & Finance Plc (LCF) sounds impressive, but the business behind it was anything but. In the late 2010s, LCF issued ‘mini-bonds’, raising capital from individual investors to lend on to small businesses. LCF offered rates of up to 8%, tax-free via ISAs, which unsurprisingly attracted a large inflow of cash. Then, in mid-December 2018, the Financial Conduct Authority (FCA) ordered LCF to withdraw its marketing material with immediate effect.

LCF’s investors had a worrying Christmas followed by a grim new year in which the company went into administration before January had ended. Almost 12 months later, the Financial Services Compensation Scheme (FSCS) declared that LCF had failed. However, that did not mean investors received any immediate compensation. To add insult to injury, in March 2019, HMRC wrote to LCF’s ISA holders saying that their plans did not satisfy the ISA regulations and therefore any income from them was taxable.

A raft of legal arguments followed involving both the FCA and FSCS about the nature of LCF’s offerings and whether the company gave ‘advice’ when promoting its products. In mid-April 2021, 28 months after the FCA first blew the whistle, a resolution emerged. The FSCS has since paid full compensation to about 25% of LCF investors while the Treasury will pay the remaining 75% on their investment, capped at £68,000. This will ultimately cost you, the taxpayer, about £120 million.

The Treasury’s payment will not be quick. The government first must pass primary legislation “as soon as parliamentary time allows”, after which cheques will flow within the following six months. While that may seem painfully slow, in truth those 8,800 investors are lucky to receive anything. As the Treasury statement and the need for new legislation both underline, existing law should leave most LCF investors with nothing.

The whole acronym-laden saga is a classic example of the wisdom of the saying: “If it looks too good to be true, it probably is”. Always take advice before parting with your money.


The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investing in shares should be regarded as a long-term investment.

Ancojada Limited is not authorised or regulated to provide financial advice.

All financial advice is provided by other regulated businesses.

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