London Capital & Finance Plc (LCF) joint administrators, Smith & Williamson LLP, have provided an update on matters as it stands now.
Extending Due To Complexity
On the 16th of January, 2020, the extension of LCF administration done by Smith & Williamson, was granted by way of a court order. The new administration period will now stretch to the 29th of January, 2022. The extension was permitted in order to allow the joint administrators to investigate the company’s failure further. The plan is to maximize recoveries from the company’s creditors, with bondholders being the priority. The longer the administrators have, the easier it’ll be to sniff out a few misplaced assets.
The administrators explained that the scope of the administration that’s needed for this company warrants the extension. LCF is a large, complex company, and thus the administrators can’t get everything out of it with the time they’ve already been given.
Regulated Compensation
The second progress report of the joint administrators will be sent out to all the relevant bondholders by the end of February this year. Within this report, details about the past six months of the administration, starting from the 30th of July, 2018, will be shown to the bondholders.
As the one process drags along, so do the others. Recently, the UK’s Financial Services Compensation Scheme (FSCS) had to defend itself after it showed that it would only protect 159 bondholders that did business with LCF. In particular, these holders switched from stocks and shared ISAs to the LCF bonds. These 159 bondholders need not take any action, since the FSCS will compensate them by the end of February 2020. The reason for this limited scope of compensation, is the FSCS is only capable of compensating regulated activities, and only 159 individuals took part in activities of the sort at LCF.
Small Window Of Hope
The other 283 members, however, are exempt from protection, since the bondholders did business with LCF before the company was authorized to carry out financial services, something that only occurred on the 7th of June, 2016.
The FSCS still maintains that issuing mini-bonds is still an unregulated activity. Thus, it’s not included in the protection the FSCS is capable of offering. However, the FSCS further concluded that some customers were given misleading advice by LCF proper. If this proves true, their claims for compensation can be validated as a result, since financial advice is regulated. Sadly, FSCS speculates that not a lot of customers will be capable of this compensation.
The FSCS will be offering communications that include details of how and when customers eligible for claims regarding financial advice should make their claims. The official plan is to have these claims be reviewed in the first quarter of 2020.