Investors who got caught up in the mis-selling scandal of London Capital & Finance (LCF) are raising money to pay for a legal fight against the Financial Services Compensation Scheme (FSCS).
The disgraced investment firm sold £237m ($292m, €270m) worth of mini-bonds to over 11,600 individuals, which prompted the Financial Conduct Authority to place a temporary ban on the promotion of these speculative products to retail investors.
The bondholders’ action stems from the FSCS’ decision to compensate only 159 victims.
This was because their cases were considered to fall under the remit of the lifeboat scheme as their investments were made through regulated products, such as stocks and shares Isas.
The victims are raising money via website Crowdfunding; and they are being represented by a team of legal advisers who are looking after the judicial review against the FSCS on a pro-bono basis.
Asking for help
The team is made up of solicitors from Shearman & Sterling and three barristers from Brick Court Chambers.
The bondholders are trying to raise £7,000.
The money is going to pay for court fees, which are estimated to be between £2,000 and £3,000, and for printing and other costs considering the voluminous number of documents involved in the case – approximately £4,000.
At the time of publication, they had managed to raise £6,678.
Shearman and Sterling is basing its case on investments made after 3 January 2018, which is when Mifid II came into effect.
“We are asking the court to quash the FSCS’s decision to refuse compensation for LCF investments made after 3 January 2018, and to reconsider paying compensation in the light of the court’s judgement,” the crowdfunding page said.
“Currently, only 150 or so investors out of 11,500 have had their compensation payments made. The case, if successful, would benefit approximately half of the LCF bondholders.”
Seeking redress
The aim of the judicial review is to achieve compensation for any bondholder involved, regardless of whether their investments were through regulated products.
If the judgement goes in the victims’ favour, they could be compensated by the FSCS for the sum invested minus any funds already received.
But the legal team said that they won’t be able to take on any other LCF bondholder ‘s case as they lack the resources to do so.
The lifeboat scheme acknowledged the judicial review when it was filed in February 2020, but claimed it did everything it was legally required to do.
