The FSCS said today that it cannot help 283 London Capital & Finance victims because they became customers before the firm was authorised in June 2016.

Some 11,600 investors were hit last year by the £236m collapse of ‘mini-bond’ firm London Capital & Finance (LCF). Many have been fighting for compensation since then.

The FSCS says that it is still reviewing the case but is unable to help 283 bondholders who dealt with LCF before it was authorised. It will write to these customers to explain its actions.

More positively it has said it will “protect” 159 bondholders who switched from stocks and shares ISAs to LCF bonds. It plans to compensate these customers by the end of February 2020.

However, while there is good news for a small number of bondholders the FSCS has declined to give any promises that the majority of investors will be compensated.

In a statement the FSCS said: “FSCS is unable to protect the 283 bondholders who dealt with LCF before it was authorised to carry out financial services business (on 7 June 2016). We will contact these customers to confirm this.”

The FSCS continues to maintain that the act of issuing mini bonds is “not a regulated activity” and not something it can protect generally.

It said: “We have concluded there will be some customers who were given misleading advice by LCF and so have valid claims for compensation. However, we expect that many customers will not be eligible for compensation on this basis.

“We will provide a further communication with details of when and how customers in this category can submit their claims. We will aim to start reviewing these advice claims in the first quarter of 2020.”

The compensation body will provide a further update by the end of February and says in the meantime LCF customers do not need to take any action.

Several investigations are now under way into the affair including an FCA-requested independent inquiry led by Dame Elizabeth Gloster into the FCA’s handling of the failure.

LCF entered administration on 30 January 2019 and since then the FSCS has investigated possible bases for claims. Around 11,600 bondholders purchased 16,700 bonds from LCF worth £237m, the FSCS believes.

One issue is whether the bonds were true investments or deemed to be ‘loans’ to LCF which then invested the money. Investments would be covered by the FSCS but not loans.

The FSCS says it is also reviewing advice claims on a case-by-case basis to determine whether misleading advice was given.

The FSCS says it acknowledges that many customers were given incorrect information about investing in LCF bonds but “being given incorrect information on its own doesn’t constitute misleading advice. For that reason, and based on our investigations so far, we believe many LCF customers are unlikely to be eligible for compensation on the basis of misleading advice."