FCA Censures London Capital & Finance for Unfair and Misleading Financial Promotions

The Financial Conduct Authority (FCA) has censured London Capital & Finance (LCF) for its unfair and misleading financial promotions of minibonds, which were marketed to retail investors. The FCA found that LCF had promoted the minibonds in a way that presented a misleading picture of their true nature, including the presence of hidden charges and their high-risk and unsustainable nature. Furthermore, LCF had used bondholders' money to fund comparison websites which showcased its minibonds next to safer investments with lower returns, giving the impression that they were as safe. LCF had also falsely advertised the minibonds as being ISA compatible. While the FCA does not believe it appropriate to impose a financial penalty on LCF due to the firm being insolvent, they have taken steps to invest £98 million over three years to strengthen their data analytics in order to better identify potentially problematic firms. Additionally, the FCA banned the mass marketing of speculative illiquid securities to retail investors in 2020. The Serious Fraud Office is also considering whether those responsible for running LCF may have been involved in defrauding investors, which could be held partially responsible for the losses borne by investors.