London Capital and Finance

Treasury written question – answered on 22nd March 2019.

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Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy)

To ask the Chancellor of the Exchequer, with reference to the collapse of London Capital of Finance, what steps he is taking to prevent investment schemes which engage in mis-selling from trading.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Department for Business, Energy and Industrial Strategy) (Industrial Strategy)

To ask the Chancellor of the Exchequer, with reference to the collapse of London Capital Finance, what recent assessment he has made of the (a) adequacy of the financial regulatory framework and (b) effectiveness of that framework in relation to inexperienced investors.

Photo of John Glen John Glen Minister of State (Treasury) (City), The Economic Secretary to the Treasury

The Government takes the failure of London Capital and Finance (‘LCF’) very seriously and is closely monitoring current developments. The Serious Fraud Office, working in conjunction with the Financial Conduct Authority (‘FCA’), has opened an investigation into individuals associated with LCF and it would be inappropriate for the Government to comment further while this investigation is ongoing.

HM Treasury keeps the regulatory framework for financial services under constant review, and updates it as necessary. We are committed to maintaining high standards of investor protection within our regulatory framework for financial services. However, this needs to be balanced with a need to regulate only where there is a clear case for doing so.

The marketing and promotion of minibonds, such as those sold by LCF, are already subject to financial promotion restrictions set out in the Financial Services and Markets Act 2000. In the UK, responsibility for regulating the promotion and marketing of minibonds lies with the FCA, and firms that fail to meet any of the relevant requirements may be subject to enforcement action.

Turning to the matter of compensation for those affected by this issue, the Financial Services Compensation Scheme’s (‘FSCS’) current assessment is that LCF’s activities are not FSCS-protected, which means LCF’s investors will not be eligible to claim for compensation from the FSCS.

However, the FSCS is working closely with the administrators to understand more about LCF’s activities. If there are circumstances that give rise to potentially valid claims, the FSCS will begin to accept claims against LCF and communicate this on their website.

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