11Jun

Trade association issues a report on cyber resilience as new ways of working become widespread

The Personal Investment Management & Financial Advice Association (PIMFA) has warned firms about the cyber vulnerabilities they may face as a result of changes they may have made to adapt to the coronavirus outbreak.

The paper, entitled ‘Cyber Resilience in Extraordinary Times’, begins by mentioning a “momentous shift in working practices” now that so many employees of financial services firms are working from home. The principal concerns of the authors of the paper can be summarised under two headings: lack of preparation and an increase in the number of ‘endpoints.’

Firstly, the paper says that many firms were forced to purchase a number of laptop computers in a very short space of time, as many employees did not have a home computer – for many people a smartphone or a tablet is sufficient for their non-work tasks, so they don’t need a computer.

Where staff do their own computers, their security arrangements may be less stringent than those on the office PCs.

Secondly, while an office-based work environment requires firms to protect a limited number of endpoints (or even one endpoint for smaller firms with just one office), now some firms are faced with the prospect of having hundreds of remote endpoints.

Many firms record their telephone calls, but while it may be relatively easy to redirect an internal telephone to an employee’s mobile device, it is harder to ensure that these calls are recorded. Some firms have addressed this by using softphone technology, but this requires a reliable connection and a high level of IT expertise to install.

The National Cyber Security Centre says that hackers and fraudsters feed on uncertainty and fear. Not only might there be little in the way of security features on a personal laptop, but cybercriminals may see the coronavirus pandemic as an opportunity to induce individuals to do something on their computer that they would not normally do. The Centre is warning firms of a significant increase in cyber-related crime, particularly fraud and extortion.

Sensible precautions firms can take include:

  • Posting warnings about the cyber threat on their intranet pages
  • Sending emails to staff warning them of the dangers
  • Adopting a policy that the laptops can only be used for work purposes, i.e. they should not be used by the employee for personal matters, and should not be used by other members of the household
  • Issuing guidance on passwords to employees working remotely, emphasising the importance of having a strong password, such as one that mixes upper-case and lower-case letters, numbers and keyboard symbols
  • Making use of two-factor authentication, where an access code is required in addition to a password. This authentication can be installed on a laptop free of charge
  • Explaining to remote workers how they can download security updates, such as patches and anti-malware applications
  • Asking remote workers to back up their files regularly
  • Ensuring staff working at home know where to seek IT assistance and where to report any suspicious activity on their computer
  • Training staff on what they need to be aware of, such as phishing attacks, suspicious attachments etc.

Finally, the report calls on firms to consider whether their remote working arrangements are working effectively and whether the firm’s business continuity strategy needs to be updated. Firms should remember that the pandemic may usher in some longer-term changes in the way people work, so it may not be the case that everyone will be back in the office in a few months’ time. The challenges of managing remote working that firms are currently facing may become commonplace.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

 

 

10Jun

FOS annual review shows overall complaints have reduced, but uphold rates have risen in some areas

The Financial Ombudsman Service annual review for the 2019/20 financial year shows a significant decrease in the total number of complaints received, although the uphold rate has risen.

Across all product areas, FOS received 271,468 complaints between April 1, 2019, and March 31 2020, which represents a reduction of 30% on the previous year’s figure of 388,392.

Payment protection insurance complaints also decreased significantly, even though the Financial Conduct Authority’s deadline for complaints about this product occurred during the financial year. The annual total of PPI complaints received by FOS was 122,153, 32% lower than the 180,507 complaints in 2018/19.

Total complaint numbers fell by around one third or one quarter in most areas: credit card complaints showed a 23% decrease; and the reduction was 34% for current accounts, 25% for mortgages, 23% for insurance and 29% for investments and pensions.

Consumer credit complaints fell by 33%, but some credit products bucked this trend. Complaints about conditional sale products increased by 14%, while guarantor loan cases almost doubled, increasing by 97%.

2019/20 was the first year in which FOS has accepted complaints about claims management companies, and the Service took on 1,558 new cases in this area. Around two-thirds of these cases concerned PPI claims companies.

Of the 295,596 complaints resolved by FOS in 2018/19, 32% were upheld, a slight increase on the previous year’s 28%.

Some areas showed a higher uphold rate, indeed 50% of all the banking and credit complaints were decided in favour of the customer.

Six specific areas of consumer credit had very high upheld rates:

  • 70% for payday loans, compared to 53% last year
  • 73% for point-of-sale loans, up from 53%
  • 73% for instalment loans, up from 65%
  • 78% for logbook loans, showing a very large increase compared to 2018/19 uphold rate of 34%
  • 84% for a home credit, up from 39%
  • 89% for guarantor loans, increasing almost threefold from the previous year’s 32%

FOS says that many of the upheld cases were affordability complaints. On the same day that the FOS review was published, the largest guarantor lender admitted that its credit and affordability checking procedures were being investigated by the FCA.

Although new complaints about consumer credit fell by one-third, the total number of upheld credit complaints was actually larger than last year. FOS suggests that the only reason credit complaint volumes were down was that a number of short-term lenders entered administration during the financial year.

The uphold rate for CMC complaints was also above average at 42%, as was the uphold rate for financial advisers (35%).

29% of all investment and pension complaints were upheld, but FOS remains concerned about self-invested personal pensions, where the uphold rate was 52%, more than twice as large as the 24% figure for standard personal pensions.

Although it remained the most complained about product, only one in six (17%) of PPI complaints were upheld. Packaged bank accounts have also been a fertile area for CMCs in the past, but this product also had a low uphold rate of 15%.

Chief ombudsman Caroline Wayman commented:

“The fundamentals of good customer service, and good complaint handling, are constant, and the majority of financial businesses know this. However, some businesses still need to put fairness first in how they handle customer complaints.”

 

At the same time as its annual review was issued, FOS released its five-year strategy document, entitled ‘Contributing to a fairer financial world’. The three strategic priorities for FOS between now and 2025 are:

 

  • Enhancing its service
  • Preventing complaints and unfairness arising
  • Building an organisation with the capabilities it needs for the future

 

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

09Jun

FCA confirms ban on contingent charging for pension transfers

The Financial Conduct Authority has confirmed that it will introduce a ban on contingent charging for pension transfers. Unless there are exceptional circumstances, advisers cannot use a fee-charging model under which they will only receive an advice fee if the transfer out of the occupational scheme goes ahead. Advisers must charge the same monetary amount for advice to transfer as for advice not to transfer.

The regulator says that the advice given by firms was suitable in 60% of the pension transfer cases it reviewed in 2018. While this is an improvement from the equivalent figure of 47% in a previous monitoring exercise, the fact that two out of every five transfer clients could have received incorrect advice has prompted the FCA to act. In the latest sample of advice files, the FCA says the advice was definitely unsuitable in 17% of cases, and that the remaining 23% of files did not contain enough evidence to justify the recommendation to transfer.

Looking specifically at clients who were advised to transfer out of the British Steel pension scheme, the FCA says that only one in five scheme members (21%) definitely received suitable advice. The advice was unclear in 32% of cases and was judged to be unsuitable for 47% of those advised to transfer.

The hope is that the ban on contingent charging will mean that unscrupulous advisers will no longer recommend a transfer simply because they can receive remuneration by doing so. The FCA was also concerned about the transparency of fee disclosure as if the fee is paid from the transferred funds, the charges may not be obvious to many consumers.

The FCA has instructed a number of firms to pay redress to clients who received unsuitable advice. The regulator’s enforcement division is also investigating 30 firms as a result of concerns identified during its pension transfer monitoring.

The new rules allow firms to use an approach known as ‘abridged advice’. For a smaller fee, the adviser could carry out a limited assessment to determine if a transfer would be in the client’s interest. The adviser would then carry out one of these steps:

  • Make a personal recommendation to the client not to transfer their pension
  • Inform the client that it is unclear whether or not they would benefit from a transfer. The adviser would then ask the client whether they wish to proceed to full advice, where a larger fee could be charged

The ‘abridged advice’ system can be used from June 15 2020. The contingent charging ban itself comes into force on October 1 this year.

The main exceptions to the ban are:

  • Clients who have a specific illness or condition that means they have a materially shortened life expectancy
  • Clients experiencing financial hardship, such as losing their home because they are unable to make the mortgage or rental payments

These customers can still be charged on a contingent basis.

In addition to the contingent charging ban, the FCA’s new rules mean that advisers will also need to consider whether it is appropriate to transfer their client’s pension pot to an available workplace pension. If the adviser recommends a transfer to a personal pension arrangement, then the file must justify why the personal pension is more suitable than the workplace pension.

 

Another new requirement is that firms must produce a one-page summary, limited to one side of A4, at the front of all transfer suitability reports. This summary must include:

  • Details of all charges, including ongoing advice charges
  • The adviser’s recommendation, i.e. whether the consumer should transfer their pension
  • A statement of the risks of the pension transfer or pension conversion
  • Details of whether any ongoing service will be provided

FCA interim chief executive Christopher Woolard said:

“The proportion of clients who have been advised to transfer out of their DB pension is unacceptably high. While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the client’s best interests.

“What we have set out today builds on the work we have been doing and reflects our determination to improve standards in this market. Clients need to have confidence that the advice they are receiving is right for them. The steps we are announcing today will drive up standards.”

Steve Webb, Pensions Minister in the 2010-15 coalition government, suggested that the FCA’s ban could lead some clients to opt to go ahead with a transfer, even if their adviser recommended that they should not do so.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

04Jun

Conviction secured over Covid email scam  

A man has been remanded in custody pending sentencing after he pleaded guilty to sending fraudulent text messages related to the coronavirus outbreak.

The individual sent a large number of text messages which said that they were sent by the Government and that the recipient could claim a tax refund as a result of the health emergency. However, the messages were a scam, designed to allow the man to gather the individuals’ bank account details. The messages contained a link to a website that was designed to look like an official Government webpage. The court heard that his site was “remarkably similar to UK government websites,” especially with regard to his use of logos and insignia.

The individual also passed on the consumers’ data to other scammers.

He pleaded guilty at Westminster Magistrates’ Court on Friday, May 15 to charges of fraud by false representation and possession of articles for use in fraud.

Judge Jacobs told the individual:

“You have pleaded guilty to a sophisticated fraud in which I’m perfectly satisfied you are the main player.

“What you did was to prey on the vulnerability of the majority of people in society who at this present moment are worried, petrified, fearful about their future, about their jobs, about their homes, making ends meet, getting back to work or whether they still have a job.

“Along you come, praying on those people, on anyone who might be gullible enough, and there are people sadly who would click on these scams including the elderly and others who are vulnerable because of the circumstances we find ourselves in right now.”

The investigation was carried out by the Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit funded by the banks.

Action Fraud has reported that UK consumers have suffered losses of more than £3.5 million from coronavirus-related scams since the lockdown started in late March. Trend Micro, a multinational cybersecurity and defence company, has conducted a survey which reveals that 20% of the world’s Covid-19 spam messages are sent to UK email addresses, more than any other country.

DCI Gary Robinson, head of the unit at the DCPCU, said:

“Through this investigation, we have acted swiftly to arrest and charge an individual involved in sending out fraudulent messages related to Covid-19. A large number of account details have also been recovered, helping to prevent customers from falling victim to fraud.

“The DCPCU will continue working with banks and mobile phone companies to clamp down on the criminal gangs callously seeking to exploit the Covid-19 crisis to defraud people. It is thanks to this strong collaboration between the public and private sector that we can bring these criminals to justice.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

02Jun

MAPS explains how coronavirus has changed the work it carries out

The Money and Pensions Service (MAPS) has warned that the coronavirus outbreak could contribute to a “perfect storm” for many people who are in debt and who also have mental health problems.

Even before the current health emergency, the link between financial difficulties and mental health problems was widely understood. The reasons for this include:

  • People might forget to pay bills if they have short-term memory issues
  • An inability to concentrate means that people may struggle to read the documentation
  • Budgeting is difficult for consumers with reduced problem-solving skills
  • A consumer with anxiety issues may not want to check their bills and financial documents
  • Mental health issues can cause some people to become more impulsive, so they could make inappropriate purchases and loan applications
  • Consumers becoming unable to work due to their condition, and being unable to pay bills and loan repayments as a result
  • Addictions resulting in people spending excessive sums on their addiction and having nothing left to pay bills or make loan repayments
  • Where the condition is particularly serious, an individual may be unable to manage even essential self-care tasks, like washing and eating, and so cannot possibly hold down a job or check their financial position

Paul Farmer, chief executive of mental health charity Mind, says that 50% of people in problem debt also have a mental health problem.

Mr Farmer commented:

“Both mental and financial wellbeing have been brought to the fore by the coronavirus outbreak. For some coronavirus is having an impact on their mental health, for others, it is a difficult time financially. Many will be facing a double impact of worse mental health and financial insecurity.”

According to previous research by MAPS, around 50% of debt advisers have dealt with a consumer who has threatened to take their own life. Mr Farmer urges credit providers to consider signposting or referring clients with mental health problems to free sources of money guidance and debt advice.

MAPS reports that the number of people contacting its money guidance contact centre rose by 74% in the week following the Government’s imposition of a lockdown on March 23.

Caroline Siarkiewicz, CEO of MAPS, commented:

“In recent years, many discussions have taken place to determine how best to define vulnerability, so that services could more easily identify and support at-risk customers, such as those experiencing mental ill-health. The recent coronavirus pandemic has highlighted what our research has shown for some time: most of us are just one life event away from financial difficulty. Many of our customers in the UK are experiencing that one life event now, in the form of Covid-19.

“We know money matters and mental health are often related and that one can adversely affect the other, and what we understand so far shows that people experiencing mental ill-health have worse financial outcomes. It’s not surprising that, with a decreasing but still powerful dual stigma around the financial difficulty and mental ill-health, there are many barriers for people to overcome in getting help.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

29May

FATF highlights how coronavirus may have increased financial crime risks

The Financial Action Task Force (FATF) – which sets international standards designed to fight money laundering and other financial crime – has issued a paper which “identifies challenges, good practices and policy responses to new money laundering and terrorist financing threats and vulnerabilities arising from the COVID-19 crisis.”

FATF says it believes that all of the following have played a part in increasing financial crime risks:

  • Many people have made greater use of online platforms, either because they are working remotely, or they have been prevented from meeting friends and family in person
  • Many businesses are now doing more business online as their retail premises have been closed by their national government
  • Some banks have restricted face-to-face banking services, which may have implications in areas such as verification of identity. Customers who have been forced to use online services when they would not normally do so may be especially vulnerable to scams
  • There has been a massive demand for items such as personal protective equipment and ventilators
  • Large scale unemployment or furloughing of workers, together with loss of government revenue and a general economic recession will undoubtedly have an impact on the financial and social behaviour of businesses and individuals
  • Many governments have prioritised fighting Covid-19 over other areas and have diverted resources from these other areas of their normal work
  • In many countries, on-site financial crime inspections have reduced or ceased altogether

The report says that the principal fraudulent activities appear to be:

  • Fraudsters impersonating government officials with a view to obtaining cash or bank account details
  • Scams relating to medical supplies, personal protective equipment and pharmaceutical products, where the criminals take payment for the goods but then either never deliver the product, or deliver goods that are substandard
  • Requesting donations for COVID-19-related fundraising campaigns, claiming that they are acting on behalf of a charity
  • Government officials misusing and misappropriating domestic and international financial aid and Covid-related emergency funding

FATF President Xiangmin Liu commented:

“The members of the FATF, both domestically and multilaterally, are applying every available resource to combat the Covid-19 pandemic. As the global standard-setter for combating money laundering and the financing of terrorism and proliferation, the FATF encourages governments to work with financial institutions and other businesses to use the flexibility built into the FATF’s risk-based approach to address the challenges posed by Covid-19 whilst remaining alert to new and emerging illicit finance risks.

“Criminals are taking advantage of the Covid-19 pandemic to carry out financial fraud and exploitation scams, including advertising and trafficking in counterfeit medicines, offering fraudulent investment opportunities, and engaging in phishing schemes that prey on virus-related fears. Malicious or fraudulent cybercrimes, fundraising for fake charities, and various medical scams targeting innocent victims are likely to increase, with criminals attempting to profit from the pandemic by exploiting people in urgent need of care and the goodwill of the general public and spreading misinformation about Covid-19.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

 

28May

FCA extends mortgage holidays by three months

The Financial Conduct Authority has announced that lenders will have to provide borrowers with an additional three-month payment holiday in certain circumstances where the borrower’s finances have been adversely affected by a coronavirus. Since the scheme commenced in March, lenders have already offered 1.8 million payment holidays.

However, the FCA recognises that where customers can afford to make full payments, it is certainly in their interests to do so, as interest continues to accumulate during the payment holiday. Therefore, at the end of a payment holiday, firms should contact their customers to find out if they can resume payments. If the borrower is in a position to resume their repayments, firms should accede to this request, and agree to a plan on how the missed payments will be repaid.

Where borrowers have had a payment holiday, but remain in financial difficulty, lenders will now need to consider whether it is appropriate to offer a further three-month payment holiday.

Payment holidays and partial payment holidays offered under this guidance should not have a negative impact on credit files. However, lenders will still be able to reject mortgage applications in the future when applicants may have taken a payment holiday during the coronavirus outbreak.

Lenders are welcome to provide additional forbearance over and above the new FCA requirements where they judge that this is appropriate. Examples of additional forbearance that a lender might consider include interest reductions and interest waivers.

The regulator also says that lenders should consider signposting customers towards sources of debt advice, especially if they are likely to be in longer-term financial difficulty.

Any borrower who has yet to ask for a payment holiday now has until October 31 2020 to request one. The ban on re-possessing any homes has also been extended until this date.

Finally, the FCA asks lenders to consider that many customers may not have access to digital banking services and may need to consider alternative arrangements to enable everyone to request payment holidays and access any other services they require.

Christopher Woolard, Interim Chief Executive at the FCA, said:

“Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice.

“Where consumers can afford to re-start mortgage payments, it is in their best interests to do so. But where they can’t, a range of further support will be available. People who are struggling and have not had a payment holiday will continue to be able to apply until 31 October.”

John Glen MP, economic secretary to the Treasury, said:

“Everyone’s circumstances will be different, so when homeowners can pay some or all of their mortgage, they should work with their lender on a plan.

“But if they are still struggling, I want them to know that help is there.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

27May

FCA confirms extension to period that an employee can stand in for an absent Senior Manager

 

The Financial Conduct Authority has announced that it is now possible for another person to deputise for an absent senior manager for a period of up to 36 weeks, instead of the usual 12 weeks, where the reason for the manager’s absence is related to the coronavirus outbreak.

The amendment to SUP 10.3.13R in the Handbook applies to all authorised firms and lasts until April 30 2021.

The special permission applies where one of two circumstances applies:

  • An individual who has previously been approved as a Senior Manager is absent due to Covid-19
  • The recruitment process to replace a Senior Manager is delayed due to the health emergency

The ideal position is that, if a senior manager is unable to work due to the coronavirus situation, it would be another senior manager or managers who would assume their responsibilities until they were able to return. Individuals in senior management roles should have all received specific approval from the FCA.

If a senior manager is absent and the firm decides it is not feasible to transfer all of their responsibilities to other FCA-approved senior managers, the firm would obviously need to consider who was the best candidate to step in on a temporary basis. It is the firm’s responsibility to ensure the individual in question has the skills, qualifications, experience and competence to deputise for the Senior Manager.

Once the relevant individual has been identified, the firm should apply to the FCA for a ‘modification of consent’, to allow another person to carry out senior manager tasks for up to 36 weeks. In order to be as flexible as possible, the regulator will allow firms to apply for a modification by consent as a precautionary measure, in advance of actually needing it.

The health emergency has also prompted the FCA to relax the notification requirements for firms who make internal transfers of responsibilities between existing Senior Managers.

All authorised firms are expected to have Statements of Responsibilities (SoR) that document the responsibilities of their senior managers. In normal circumstances, the firm should inform the FCA and submit updated SoRs where certain responsibilities are transferred from one manager to another. However, the regulator recognises that the current situation may require firms to change senior manager responsibilities at short notice, for example, a manager may be forced into self-isolation because they are displaying symptoms, or a family member falls ill.

With this in mind, the FCA has said that there is no need for an affected firm to submit an updated SoR to the FCA where the following criteria are satisfied:

  • The changes have been made in response to the pandemic
  • The changes are of a temporary nature and, in the longer term, the firm expects to revert back to its previous arrangement

However, while firms don’t have to send the updated SoR to the FCA, they are expected to document the change in responsibility that has occurred and to retain a copy of this document internally.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article

26May

Former bank governor and ex-minister confirmed as speakers at trade body’s Virtual Fest

The Personal Investment Management & Financial Advice Association (PIMFA) has announced two high profile speakers for its Virtual Fest at the start of next month.

“Virtual Fest” aims to provide a wide-ranging programme of activities to support industry professionals who are currently working from home, and the Association suggests advisers could use the event to seek support on issues such as:

  • The optimum working arrangements during the current health crisis
  • How to engage with the FCA while adopting alternative working arrangements
  • Personal wellbeing while working in isolation

PIMFA promises that festival attendees will be able to connect easily via a normal internet connection, although they will need to register their attendance in advance.

The first special guest to be announced was former Bank of England governor, Mark Carney. He served as the Bank’s governor from July 2013 to March 2020 and is now the UN’s Special Envoy for Climate Change and Finance Adviser to the Prime Minister for the COP26 climate change summit that has been rescheduled for next year.

Baroness Morgan of Cotes (Nicky Morgan) has also agreed to speak at the conference, and she will provide delegates with some insight as to how both coronavirus and Brexit might affect the financial services industry. Baroness Morgan was Secretary of State for Education between July 2014 and July 2016, Chair of the Treasury Select Committee between July 2017 and July 2019 and Secretary of State for Culture, Media and Sport from July 2019 to February 2020.

The Association has confirmed that conference delegates can claim 10 hours of Continuing Professional Development by attending the full two days of Virtual Fest.

Liz Field, Chief Executive of PIMFA, commented:

“We are delighted that both Mark Carney and Baroness Nicky Morgan will be joining us as keynote speakers for Virtual Fest alongside a number of other leading industry figures.

“Their expert knowledge and experience will provide extremely valuable insights into some of the biggest challenges facing both financial services and wider society as well as current Government thinking in the wake of the COVID-19 pandemic and its effects.

“We said at the start of the pandemic and the current lockdown restrictions that PIMFA would be there to provide our wealth management and financial advice colleagues with as much support as possible and Virtual Fest is an illustration of our continuing commitment to supporting our member firm operations and individuals continued professional development during this period of isolation.”

Baroness Morgan of Cotes commented:

“A well-functioning UK financial services sector has been the engine of the UK economy for decades but it faces twin challenges at present from both COVID-19 and from preparations for our future trading relationship with the European Union.

“No-one can predict with any certainty what the impact of the COVID-19 pandemic will be on society or the economy, or how long-lasting the effects will be, and there remains a high degree of uncertainty around what the basis of our future financial services arrangements with the EU will look like.

“Understandably this is a cause of deep anxiety for many, and it is clear that a properly functioning financial services industry will be vital to ensuring that we can return to something approaching normality in the future. I look forward to sharing my insights into the current debate in Westminster on these issues, and what it will mean for the future of financial services in the UK at the Virtual Festival.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

22May

FSCS will soon be in a position to issue the first LCF advice decisions

The Financial Services Compensation Scheme (FSCS) says it will start to issue decisions on London Capital & Finance (LCF) claims by the end of May 2020. The process is expected to be completed by the end of September 2020.

Quite simply, when a decision is reached on each claim, the individual customer will receive a letter informing them of the outcome, and if their claim has been successful, the letter will be accompanied by a cheque for what FSCS judges to be the appropriate amount of compensation.

Caroline Rainbird, FSCS’s CEO said:

“Having spent time reviewing all of the information we have gathered, I am pleased that we are now in a position to look at individual claims and will start to issue decisions on those claims this month, thereby providing some certainty for LCF customers.

“We appreciate that this process has been a lengthy one and that for many LCF customers the wait is not yet over. We want to reassure LCF customers that we are continuing to work tirelessly to bring this process to a conclusion and ensure that those customers who are entitled to compensation receive it.”

The LCF saga has been one of the most controversial stories in financial services in recent times.

Before it collapsed into administration, LCF was a firm that issued mini-bonds. However, the bonds themselves are not regulated by the Financial Conduct Authority, so most customers of the firm had no FSCS protection and lost their entire investment when the firm failed.

In its latest press release, FSCS acknowledges this by saying once again that a large proportion of LCF customers will not be eligible for compensation.

The only LCF customers who are likely to receive compensation are those who transferred funds from stocks & shares ISAs into the mini-bonds, or those who received professional advice to invest in the LCF bonds, and whose advice may have been misleading as to the existence of FSCS cover. In the latter case, they are eligible for FSCS protection as providing financial advice is an FCA-regulated activity. Those who transferred out of ISAs into LCF bonds have already been compensated, however, only 159 customers fell into this category.

FSCS will provide a further update on the situation before the end of June.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.

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