The savings of more than 15,000 members of the public were in doubt on Thursday as London Capital & Finance, the high risk bond company which raised more than £225 million from investors collapsed into administration.
LC&F marketed its investments with interest rates of 8% and more, persuading many elderly people to part with their funds.
However, the Financial Conduct Authority launched an investigation into the company before Christmas and subsequently stopped it from raising more money or touching its assets.
The Evening Standard revealed how the company’s products were marketed via price comparison websites which appeared to be independent but were in fact run by a company operated by the director of LC&F’s outsourced marketing arm, Surge. Surge denied any wrongdoing.
The move throws into doubt how much bondholders, some of whom invested over £100,000 in the company, are likely to get back.
They have received no interest since the FCA investigation began.
Smith & Williamson LLP was appointed joint administrators yesterday after being called in by the directors of the company. A call handler answering the phone number for the company in insolvency advised bondholders to wait for updates on the website.
News that it was LC&F itself which filed for administration, rather than external creditors, led to instant anger from unregistered barrister and claims handler Jane Sanders of JSCS, who demanded bondholders be allowed to choose their own administrator.
“We need to hire somebody who specialises in getting money back for investors, and it should be bondholders choosing them, not the company itself,” she said, adding that bondholders should be able to elect their own administrators when the first creditors’ meeting is held.
A document prepared by Smith & Williamson for bondholders outlining the chain of events says: “As a result of [the FCA action] LCF has been unable to raise further monies from investors… Professional advice was sought and the company was advised that LCF was insolvent and that it should be placed into administration to provide the best outcome for bondholders and other creditors.”
Questions were immediately being asked about why the company was reliant on new investors to remain solvent.
The notice of the administrators’ appointment was filed in the High Court yesterday.
The Evening Standard has previously disclosed that LC&F was a lender to companies linked to the founder director Simon Hume-Kendall including a Cornish holiday park, the stock market quoted Independent Oil & Gas and Atlantic Petroleum, an oil explorer quoted on the Copenhagen stock market.
Another associate, Hume-Kendall’s friend Spencer Golding, made introductions which resulted in LC&F giving a loan to River Lodge Equestrian, the stables where he was patron.
Millionaire Golding, a helicopter-owning big spender in the equestrian world, is currently banned from serving as a director due to misdeeds while working in the timeshare business.
He was involved in LC&F’s fundraising because he helped a deal for it to use the controversial marketing firm Surge, run by Ferrari-driving chief executive Paul Careless, to raise money from the public. A spokesman for Golding said the millionaire had introduced the heads of LC&F and the equestrian stables.
Hume-Kendall left LC&F a year after founding it under the name of South-Eastern Counties Finance. His and Golding’s friend Andy Thomson took it over and rebranded it LC&F. Thomson, another big spender in the equestrian world, remained as chief executive.
In a press release, Smith & Williamson said: “Investors in LCF’s mini-bonds were retail clients who were UK taxpayers and who fall into the category of either High Net Worth Individuals, Sophisticated Individuals, Self Certified Sophisticated Individuals or Restricted Investors, as noted on its website.”
Finbarr O’Connell, administrator, added: “It is early days, but our role will be to work with LCF’s borrowers, staff, the Security Trustee for the Bondholders, the FCA and other stakeholders to ascertain what needs to be done in order to maximise the returns to the Bondholders. We are especially focusing on the various loans made by the Company to borrowers. At this juncture, regrettably we are not in a position to return any monies to Bondholders.”
Adam Stephens, also an administrator, said: “There are some 14,000 bondholders with LCF. We are working to ensure that they are all contacted directly and urgently so that they are aware of the situation. We have set up a dedicated call centre and email system. We would ask the Bondholders to bear with us in these early days as there is much to do.”
Fellow administrator Colin Hardman added: “We are working using existing LCF personnel, and gathering information relating to the loans LCF made to various borrowers. These loans to borrowers are the major asset of LCF and the Administrators will do nothing to jeopardise the position of the borrowers and hence their ability to repay their debts to the Company.”
The FCA today said it had ordered the company not to dispose of or deal with its assets last month because it had “serious concerns about the way the firm was conducting its business.”
Its initial concerns were about the way the company was marketing its bonds in a misleading manner.
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