London Capital and Finance PLC (LCF) was an investment firm operating mainly by advertising on social media platforms.
It collapsed into administration in January 2019, following an investigation by the Financial Conduct Authority (FCA) into misleading advertising, but only after a total of 11,605 people had invested a total of £236m into it.
It managed to attract this large amount in a very short time because LCF was offering interest rates of around 8% on 'three year mini-bonds', which at best are high-risk investments, and at worst almost guaranteed not to return anything like that amount. However, the advertising on-line was suggesting that the investors were placing their money into safe, secure fixed-rate ISA's ...... at best, the investors will be lucky to get around 20 per cent of the money they put in.
Now, apart from any fraud that may have taken place, this story is indicative of what can happen when a government relentlessly holds interest rates artificially low, punishing savers, whilst rewarding spenders with cheap credit. Savers are desperate to get rates at least better than inflation so they turn to get rich quick offers that promise far more than the current savings rates offered mainstream.
If they don’t do this, they turn to property and thus fuel the property price boom which has overtaken much of the country over the past decade. I personally know of one couple, who borrowing on top of each property they acquire have built up an empire of eight or nine properties for letting. They could never have done this with normal conditions of interest rates .... so while they flourish in a sea of cheap credit to finance their empire, others, the more prudent, those who saved hard are punished with no prospects of interest rates ever rising above inflation ....
So desperate people, like the first-time investors - inheritance recipients, small business owners or newly retired who were caught up in LCF's enticing offer, take stupid risks and lose their lifetime savings. Many will end up on state benefits, when they needn't have been, and simply because we have become a nation that rewards reckless spending. When the crash comes, and it surely will, millions will be caught holding assets that they could never have afforded and a property price recession may well result.
Meanwhile, The Serious Fraud Office (SFO), says it has arrested four people, who have all been released pending further investigation, and it appears that warnings about LCF were being spread by financial advisors as long a go as 2015 - the Financial Conduct Authority (FCA) may well have failed once again.
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| Adverts Can Be Misleading - Or Make False Promises. |
It collapsed into administration in January 2019, following an investigation by the Financial Conduct Authority (FCA) into misleading advertising, but only after a total of 11,605 people had invested a total of £236m into it.
It managed to attract this large amount in a very short time because LCF was offering interest rates of around 8% on 'three year mini-bonds', which at best are high-risk investments, and at worst almost guaranteed not to return anything like that amount. However, the advertising on-line was suggesting that the investors were placing their money into safe, secure fixed-rate ISA's ...... at best, the investors will be lucky to get around 20 per cent of the money they put in.
Now, apart from any fraud that may have taken place, this story is indicative of what can happen when a government relentlessly holds interest rates artificially low, punishing savers, whilst rewarding spenders with cheap credit. Savers are desperate to get rates at least better than inflation so they turn to get rich quick offers that promise far more than the current savings rates offered mainstream.
If they don’t do this, they turn to property and thus fuel the property price boom which has overtaken much of the country over the past decade. I personally know of one couple, who borrowing on top of each property they acquire have built up an empire of eight or nine properties for letting. They could never have done this with normal conditions of interest rates .... so while they flourish in a sea of cheap credit to finance their empire, others, the more prudent, those who saved hard are punished with no prospects of interest rates ever rising above inflation ....
So desperate people, like the first-time investors - inheritance recipients, small business owners or newly retired who were caught up in LCF's enticing offer, take stupid risks and lose their lifetime savings. Many will end up on state benefits, when they needn't have been, and simply because we have become a nation that rewards reckless spending. When the crash comes, and it surely will, millions will be caught holding assets that they could never have afforded and a property price recession may well result.
Meanwhile, The Serious Fraud Office (SFO), says it has arrested four people, who have all been released pending further investigation, and it appears that warnings about LCF were being spread by financial advisors as long a go as 2015 - the Financial Conduct Authority (FCA) may well have failed once again.
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