May 21, 2020 / 6:44 AM / 15 days ago

UK financial compensation body raises levy to fund LCF claims

LONDON (Reuters) - Britain’s Financial Services Compensation Scheme (FSCS) said it had earmarked 44 million pounds to pay claims from a small number of the investors who lost money after the collapse of investment company London Capital & Finance (LCF).

The FSCS said it would levy regulated financial firms 649 million pounds in the 2020/2021 year that started in April, 14 million pounds more than it had indicated in January, in part to cover the LCF claims.

“The overall increase in the FSCS levy since the January forecast partly reflects the ongoing progress we are making in relation to the LCF failure,” said FSCS Chief Executive Caroline Rainbird in a statement.

LCF went into administration in early 2019 with losses of up to 237 million pounds after the Financial Conduct Authority (FCA) directed the firm to withdraw promotional material for so-called “mini bonds”.

The compensation body had said it could only help 159 of 11,600 investors holding bonds issued by LCF, leading to bondholders to seek a judicial review of the FSCS’ decision.

“Whilst it is too early to say how many LCF customers will be eligible for compensation, for the purpose of the levy we have estimated an amount of 44 million pounds,” Rainbird said on Thursday.

Elizabeth Gloster, a former High Court judge, is heading an independent inquiry into the FCA’s handling of LCF and is due to complete her report in the summer, which could help bondholders with their compensation claims.

($1 = 0.8201 pounds)

Reporting by Huw Jones; Editing by Edmund Blair

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