Four arrested as Serious Fraud Office probes collapsed mini-bond provider

By Justin Cash

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Mar 21, 2019

Four people have been arrested as the FCA and Serious Fraud Office continue their probe into collapsed mini-bond provider London Capital & Finance.

The firm fell into default in January, a month after the FCA issued it with an order to take down promotional material of the bonds, ruling they were “misleading, not fair and unclear”, as they were not eligible for Isa status as claimed.

It subsequently ordered LCF to cease all regulated activity.

An update on the FCA website says the FCA believes around 14,000 customers were invested in the bonds.

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While issuing mini-bonds is not a regulated activity so does not require FCA authorisation, authorised firms approving promotions must make sure they follow FCA rules, and the regulator says it had “serious concerns” about the way LCF was conducting its business before imposing requirements on it.

A further statement released by the SFO today says that on 4 March 2019, four individuals were arrested in the Kent and Sussex areas. All four individuals have been released pending further investigation.

The SFO says it decided to open an investgiation after the FCA referred the case to the National Economic Crime Centre.

The arrest operation brought together the National Crime Agency, City of London Police, Kent Police, Sussex Police and the South East Regional Organised Crime Unit

The statement reads: “The SFO encourages members of the public who have invested in this scheme over the period 2016 to 2018 to contact us.”

The FCA’s website page about the case warns that investors may not be able to claim on the Financial Services Compensation Scheme because issuing mini-bonds is not a regulated activity, and the FSCS typically only covers regulated business.

However, if unsuitable advice on investments could be proved, then the FSCS may be able to handle those claims.

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