Government launches investigation into failed mini-bond firm LCF

The Treasury has launched an investigation into failed bond firm London Capital & Finance (LCF), which took investments totalling £236m from more than 11,500 savers.

LCF sold mini-bonds promising returns of up to 11pc but collapsed in January. Mini-bonds are not regulated or tradeable on an exchange, unlike retail bonds.

The investigation will examine LCF’s collapse as well as regulation of the firm by the city watchdog, the Financial Conduct Authority (FCA).

Economic Secretary John Glen said: “We urgently need to get to the bottom of the circumstances around the collapse of LCF.”

The FCA has appointed former Appeal Court judge Dame Elizabeth Gloster to lead the probe, which aims to ensure similar mini-bond failures never happen again.

The Treasury will also review how mini-bonds are regulated, their role in the economy and how they are sold.

FCA chairman Charles Randell said: “This investigation will establish what happened with LCF and whether further changes are required. It will support the broader review of mini-bond regulation."

Earlier this month LCF investors were urged to register with a lifeboat fund that could refund them lost cash.

The Financial Services Compensation Scheme (FSCS), which pays out for money lost with failed firms, asked these customers to sign up for possible compensation.

Another way LCF customers my receive compensation is through administrators Smith & Williamson, who are winding the company up.

But in March the administrators said investors might only get back 20pc of their cash from this process.

The Serious Fraud Office is also investigating LCF.

sam.barker@telegraph.co.uk

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