“At this stage though, we don’t have access to all of the information needed to determine the nature and extent of this misleading advice, and we’re still working with the relevant parties on gaining access to it,” the FSCS said.
LCF was an investment firm that issued mini-bonds to its clients.
A mini-bond is an unlisted debt security usually distributed by small business to raise funds, and is not regulated by the Financial Conduct Authority (FCA).
In this case, the company promised an 8% return on those bonds.
The FSCS was looking into the matter as it was not clear whether clients of LCF would have been eligible for compensation.
But its investigation found that investors received misleading advice from a firm called Surge Financial, which acted on behalf of LCF.
As financial advice is a regulated activity, clients are likely to receive remuneration, the FSCS said.
Ongoing investigation could take months
Now the Scheme is turning to LCF investors to help it build a better picture of what advice was given and how.
A spokesperson for the FSCS said: “Throughout our investigation into LCF, we have been as transparent as possible so that both LCF investors and our levy payers know where they stand. Having established that there are customers who were given misleading advice and therefore may be eligible for compensation, we now need to determine the full extent of this advising activity.
“We would therefore urge LCF investors to complete the pre-application questionnaire as this will help us enormously in the next stage of our investigation. We expect this will take a number of months, but we will do all we can to come to a decision as quickly as possible.
“If we do start accepting claims, it is important for investors to remember that if they come to us directly there will be no charge to pay as we are a completely free service.”
On 20 June 2019, the owner of Surge Financial was arrested, it followed four others being taken into custody in March 2019.
All were released pending further investigation.