The UK high court has ordered the trustee of London Capital & Finance (LCF) to be replaced with an independent one to safeguard any funds owed to investors.
Global Securities Trustees was said to have strong links to the people behind the LCF scandal, which conned over 11,600 investors out of £237m ($312m, €280m) through the sale of unregulated mini-bonds.
Its removal was considered by firm’s administrator Smith & Williamson to be in the best interest of the investors, said law firm Shearman & Sterling, which is representing some of the victims.
What now?
Thomas Donegan, partner at the law firm, told International Adviser: “Replacing or removing the trustee was considered by the administrators to be necessary prior to distributing any funds to investors, because otherwise these funds might get caught up again with those responsible for LCF.
“The court expressed serious concerns about the conflicts of interest and expertise of those involved.
“A major step forwards towards being able to distribute some of the money people lost to bondholders has taken place.
“However, the new trustee will now need appointing. It should take a few weeks to agree terms with the new independent trustee and then for the court to rubber stamp the appointment, so this cannot happen immediately.
“[The independent trustee] will act as an intermediary between bondholders and the administrators in relation to payments and potentially some other matters. It is a trustee for the bondholders as beneficiaries, so is answerable to them.”
Donegan added this might not have an immediate effect on compensation due to LCF victims, but it “will resolve a major impediment to distributions”.
