At a time when some Ghanaians are coming to terms with the loss of their investments to gold dealership company, Menzgold, thousands in London are waking up to a similar reality.
The BBC reports that thousands of people who invested in a high-risk bond scheme marketed as a “Fixed Rate ISA” fear they have lost everything after the company collapsed.
London Capital & Finance (LCF), now in administration, took £236m following a marketing campaign that is now under investigation for mis-selling.
Many were first-time investors – inheritance recipients, small business owners or newly retired.
The marketing campaign
LCF paid an agent, Brighton-based Surge PLC, 25% commission – which amounted to £60m – to run the marketing campaign.
A series of web adverts promising 8% returns from secure ISAs were released and in addition a comparison website – run by a company with links to Surge – would compare the 1% and 2% return ISAs from high street banks with the investments at LCF.
LCF was authorised by regulator the Financial Conduct Authority (FCA) – but the FCA said the authorisation was to provide consumer financial advice, not the sale of bonds or ISAs.
The FCA subsequently ordered the advertisements should stop running.
Where did the money go?
In a letter to bondholders administrator Finbarr O’Connell said once the £60m to Surge was paid, returns of up to 44% would be required in order for LCF to make good on its promises.
Investors were told the funds – and therefore risk – would be spread across hundreds of companies but, according to Companies House records, LCF loaned money to 12 – four of which have never filed accounts, nine are fewer than three years old, and nine had loans from LCF in 2017.
Much of the cash was loaned to companies that then “sub loaned” to others. Bondholders have raised concerns about connections between the directors of companies that received money and those who ran LCF.
Who were the directors?
Michael Andrew Thomson, known as Andy Thomson, took over as the boss of LCF in 2015 and is also director of horse riding company GT Eventing.
Paul Careless is the majority shareholder of both Surge PLC and RPDigitalServices – the company that powered ISA comparison websites.
Let down by the regulator?
In December the FCA froze LCF’s activities, pulled the adverts and in January found that LCF had “made communications in relation to its fixed rate ISA or bond which were misleading, not fair and not clear”.
The FCA findings included that LCF’s bonds did not qualify to be held in an ISA account and therefore investors were being misled by being told the interest they earned would be tax free.
The FCA said it was “unlikely” investors would be protected under the Financial Services Compensation Scheme (FSCS) but it was “for the FSCS to determine”.
Independent financial adviser Neil Liversidge wrote to the FCA in 2015 warning it about the scheme.
Mr Liversidge said: “The way it was promoted, a great many people could have fallen for this.
“A client brought it to us but when we looked into it there was a lot of interconnection between the people they were lending to and the management of LCF themselves.
“We warned our clients off and the same day we wrote to the regulator raising our concerns about the promotion.”
Ms Anderson said: “We feel let down – we trusted this company because they had been regulated and authorised – we then found that they weren’t even allowed to manage ISAs.
“The FCA should have known that before they allowed us to buy these products.”
What do those involved say?
A spokesman for Surge Financial said: “Surge has a number of clients and its fees for LCF are in line with the industry standard.
“LCF was an FCA regulated business and it signed off all marketing materials and financial promotions prior to publication as required by the Financial Services and Markets Act.
“Surge was a supplier of services used in relation to raising investment for LCF. It did not handle client money and had no involvement in the deployment of funds to borrowing companies.”
Mr Thomson has not responded to BBC requests for comment.
The FCA said it could not comment further.
IN THE LAP OF LUXURY
LCF’s chief executive Andrew Thomson lives on a £1.4 million farm in Kent with no mortgage and spends lavishly on his passion for eventing.
He has reputedly bought another equestrian farm nearby. He has used LCF money to sponsor equestrian events and his daughter’s eventing career through the family company, GT Eventing. Locals say the family has become extremely wealthy in recent years.
Paul Careless, chief executive and owner of Surge Financial, the marketing operation which was taking commissions of 20% from LCF for selling its bonds, bought a £1.5 million helicopter in December and reputedly had a new £310,000 Aston Martin delivered in the same month, adding to his black Ferrari reputedly delivered in the summer.
Spencer Golding, who introduced the Surge marketing machine to LCF, owns a helicopter and bought a stud farm in East Sussex for £2.4 million with no mortgage.
LCF lent millions of pounds to businesses associated with Simon Hume-Kendall, who set up the forerunner to LCF under the name of South Eastern Counties.
Careless, Golding and Hume-Kendall were not involved in the management of LCF