Who could be entitled to compensation?
The FSCS can only pay compensation to consumers where financial activity is regulated – and unfortunately, the sale of mini-bonds isn’t generally regulated.
It has already paid around £2.7 million in compensation to 135 customers who had invested their bonds after making a transfer from a stocks and shares ISA, as this is a regulated activity.
The FSCS says some customers will also have valid claims for compensation due to being given misleading advice by the firm – again, this is because advice is a regulated activity.
However, the FSCS says for information to be defined as “advice”, it must have an element of comment or value judgement which could influence a customer’s decision. This means the FSCS has to analyse exactly what was said to each individual customer in order to decide whether they were given misleading advice.
Unfortunately, the FSCS has already said it expects a large proportion of former LCF customers WON’T be eligible for compensation on this basis.