LCF mini-bond mis-selling
In 2019, following the collapse of London Capital & Finance, after more than 11,000 investors had poured £236m into mini-bonds offered by the firm. A mini-bond is an unlisted debt security, typically issued by small firms in order to raise funds with investors. Retail investors were attracted to invest into the mini-bonds, with interest rates of 6.5% to 8%. Despite the high risks involved with mini-bonds, the firm marketed the investments as low risk to investors. As little as 20% of the money may one day be recovered, according to administrators.
The Serious Fraud Office arrested four individuals in March 2019, as it opened an investigation into the firm. In 2019, the UK’s Financial Services Compensation Scheme (FSCS) carried out a review into the collapse of LCF and found that some clients may have been given misleading advice, and that some investors may be eligible for compensation from the FSCS.