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11,625 bondholders invested around £237m in the products sold by London Capital & Finance Plc (LC&F). LC&F failed in January 2019, and the administrators estimated in March that investors might only get 20% of their investment back.

Individuals at LC&F are being investigated by the Serious Fraud Office. An independent investigation of the regulation of ‘mini-bonds’ and the supervision of LC&F by the regulator, the Financial Conduct Authority, is also underway. That investigation is expected to report in November 2020.

A complication to the case is that ‘mini-bonds’ were not themselves regulated by the FCA, but giving financial advice about them was.

The Financial Services Compensation Scheme is reviewing bondholders’ experiences and potential eligibility for compensation. In the first months of 2020 it paid compensation to some investors who had switched stocks and shares ISAs to LC&F mini-bonds. It hoped to have considered cases involving potential misleading advice by September 2020.

But most bondholders are unlikely to be eligible for compensation with the existing scheme. The Government could, in exceptional circumstances, decide to set up an ad hoc compensation scheme.

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