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House of Commons Hansard
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Insolvency of London Capital and Finance
05 November 2019
Volume 667

The petition of residents of Linlithgow and East Falkirk,

Declares that investors affected by the insolvency of London Capital and Finance eight months ago have still to learn whether they will have access to the Financial Services Compensation Scheme; notes investors that include local residents of Linlithgow and East Falkirk have still to receive clarification about the Financial Conduct Authority's role in regulation the activity of London Finance and Capital; and further notes no explanation has been given as to why London Finance and Capital was permitted to promote itself as regulated by the Financial Conduct Authority.

The petitioners therefore request that the House of Commons urge the Treasury to ensure that the independent investigation into the events around London Capital and Finance's collapse is not in any way impeded and reaches a swift conclusion.

And the petitioners remain, etc.—[Presented by Martyn Day, Official Report, 16 October 2019; Vol. 666, c. 419.]

[P002530]

Observations from the Economic Secretary to the Treasury (John Glen):

The Government thanks the ho. Member for Linlithgow and East Falkirk Martyn Day), who has recently submitted a petition regarding the independent investigation into the failure of the firm London Capital and Finance (LCF).

The Government want to make sure we have a strong and safe financial system and recognises that this is a very difficult and uncertain time for all LCF bondholders. That is why on 23 May, the Economic Secretary to the Treasury formally directed the Financial Conduct Authority (FCA) to launch an independent investigation into the events at LCF, and approved the FCA's appointment of Dame Elizabeth Gloster to lead it.

Dame Elizabeth is looking at the events and circumstances surrounding the failure of LCF and whether, in its supervision of LCF, the FCA discharged its functions in a manner which enabled it to effectively fulfil its statutory objectives. Dame Elizabeth is able to consider any other matters she deems relevant to the events set out in the Economic Secretary to the Treasury's direction to the FCA.

The Government's view is that the investigation should take place without delay. The Government have directed the FCA to report the findings of the investigation back to the Treasury once the investigation has concluded, as well as the lessons it will take from those findings. The Treasury has stipulated that the investigation should be completed within 12 months. This will ensure that the investigation is as thorough as possible, whilst allowing the investigator to report sooner than 12 months if this is feasible. The investigation will be completed by 9 July 2020.

The petition has also raised the issue of compensation for investors. The administrators are currently estimating recoveries for investors. The Financial Services Compensation Scheme (FSCS) can only provide compensation for claims connected with certain types of regulated activities.

The FSCS is an independent body. The FSCS carries out its compensation function within rules set by the Prudential Regulation Authority (PRA) and the FCA, which are also independent from Government. As such, the Government is therefore unable to intervene or comment on specific cases and decisions taken by the FSCS.

The FSCS has been working closely with LCF's administrators and the FCA to understand more about LCF's activities. At this stage, the FSCS's investigation has led it to believe that there are protected claims, which may result in compensation for some of LCF's investors.

The FSCS is continuing its investigation and has launched a questionnaire for investors to complete, to better understand individual investor's circumstances and the number of investors that may have been impacted. It has also invited LCF investors to register for updates on its website. The questionnaire, registration for updates, and further information can be found at https://www.fscs.org.uk/failed-firms/lcf/.