Around 14,000 investors in a mini-bond promoted by London Capital & Finance (LCF) are wondering when, and indeed if, they will get their money back.


Between them they had invested a reported £214 million – an average of £15,285 each – on the promise of an eight per cent annual return, which the firm says so far has been paid.

But payments have now ceased on the order of the regulator, the Financial Conduct Authority (FCA), which has frozen the company’s assets and ordered it to cease all regulated investment activity.

The latest move came just two weeks after the FCA instructed the firm to withdraw all of its marketing material relating to its fixed rate ISAs and bonds. It says investigations are continuing.

Mini-bonds are tempting for investors because they promise much better returns than cash but claim they are without the risks associated with other investments. That is not true. Mini-bonds are simply loans to a company that promises to provide a regular return.

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In the case of London Capital & Finance, it was using the money raised to lend on to small firms. The returns promised to investors depended on those loans being serviced and repaid and on LCF’s business continuing.

The returns on mini-bonds are not and cannot be guaranteed and, as with other investments, capital is at risk. Once invested in fixed-term mini-bonds, it is very hard to get your money out early.

They are not regulated, so if the firm does collapse investors cannot get redress from the Financial Services Compensation Scheme. The FCA does regulate some of the firms that sell them – LCF is itself regulated – and in those cases all marketing has to conform with FCA rules and be fair, clear and not misleading.

At least one Independent Financial Adviser had reported LCF promotions to the FCA before its recent action.

Anyone with an investment in LCF will now have to wait and see what the regulator concludes and when and how much of their money is returned. LCF says it continues to work with the FCA to find a way forward.


Remember, mini-bonds offer no guarantees and there is no compensation scheme. If you are tempted, be aware that you may lose your money.