Four members of the creditors’ committee in the London Capital & Finance (LCF) administration have filed a judicial review claim against the Financial Services Compensation Scheme (FSCS).
The claim was one of the last accepted by the administrative court on 18 March 2020, after it closed indefinitely to the public on the evening of the same day, likely due to coronavirus.
The judicial review stems from the FSCS’ announcement claiming that it would only be able to compensate 159 bondholders out of the more than 11,600 impacted by the LCF mini-bond mis-selling scandal.
As of the end of February 2020, 135 investors collectively received £2.7m ($3.1m, €2.8m) in compensation.
Law firm Shearman & Sterling, which represents the victims of LCF, had already announced on 20 February 2020 that it was looking to file a judicial review claim against the lifeboat scheme.
Thomas Donegan, partner at the law firm, said: “We are delighted to have been able to commence this case and thank the administrative court for its cooperation.
“We are also grateful to the FSCS for their agreement to bear their own costs of the matter. The FSCS has itself repeatedly recognised the complexities involved and we now look forward to these issues being considered by the judiciary.”
Shearman & Sterling is advising the committee members on a no-fee basis.
‘Wide-ranging investigation’
The biggest stumbling block is that it is not clear whether some of the activities carried out and products provided by LCF were regulated – so only those who transferred their money from stocks & shares Isas have been deemed eligible for compensation, as they are regulated products.
Some bondholders started dealing with the firm before it received approval from the FCA, and their compensation claims have been rejected as a result.
James Darbyshire, general counsel at the FSCS, said: “We appreciate LCF is a complex and sensitive case affecting a large number of investors who are keen to understand our decisions.
“FSCS has undertaken a thorough and wide-ranging investigation to determine whether LCF carried out any regulated activities that we might be able to compensate for. This has included significant factual analysis and consideration of some complex legal and regulatory issues.
“FSCS has been transparent and cooperative in discussing the legal issues with the investors and will continue to do so. To ensure that the investors’ real concerns are fully addressed, we have taken the unusual step to agree not to seek to enforce any costs order in our favour against the investors.
“FSCS is an impartial service and is operationally independent from the financial regulators. FSCS reviews each claim on its individual merits according to the requirements under the rules, which FSCS is legally required to follow,” he added.
