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3 Lessons from the Treasury’s LCF statement

Updated: May 22, 2021

We've been following the London Capital & Finance (LCF) case closely, and the knock-on effects of this for the industry.

Earlier this month, we covered the news that the Treasury released a statement announcing a Government compensation scheme for the bondholders in LCF. which marked an extraordinary break in approach.

We also thought the statement shed light on three aspects of the LCF case which particularly struck a chord with Treasury and which may be a useful reminder to other FCA regulated firms involved with financial promotions:

1. Regulated sign-offs for unregulated products

It's worth noting that the Treasury refers to the 'Halo effect' of the financial promotion for the bond raise being issued by an FCA regulated firm, "helping LCF to gain respectability and grow to an unprecedented scale".

We know the Treasury has already been seeking feedback on the financial promotions regime and that the FCA is also keen to tighten up who can issue financial promotions - you can view our posts on s21 sign-offs and the future of retail investments for more details.

In addition, the FCA has been increasingly focussed since LCF on firms being clear on whether activity is, or is not, regulated in marketing and pre-contractual documentation.

2. Downplaying risk

On the one hand, the statement suggests bondholders should have realised that a higher return should have meant higher risk investment, which suggests that buyer beware is a concept that the Government believes remains relevant in financial services. However, it's noted that the LCF documentation led investors to believe that the investments were lower risk than they really are.

Downplaying risk in marketing material is absolutely unacceptable in the FCA's eyes and this statement from Treasury may provide further incentive for this to be an area the FCA focusses on in its supervision of financial promotions.

3. Inappropriate investor certification

Novice investors were encouraged to declare themselves as sophisticated investors, enabling them to access the product when it should not have been available to them. The Treasury has cited this as an example of the “dishonest tactics” used to persuade individuals to invest.


If you feel like your firm could do with tightening up its financial promotions, distribution or product governance controls, Adempi can help with reviews, processes and training. Get in touch with the team at


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