Thousands of first-time investors who lost their savings after investing with London Capital & Finance (LCF) have been told it is unlikely they will qualify for compensation. Nearly 12,000 people put £236m into the firm which collapsed a year ago. The Financial Services Compensation Scheme (FSCS) has announced the majority of people "will not be eligible for compensation". It is a body blow to many investors, some of whom lost their life savings.

Their hopes were raised last May when the FSCS took the unexpected step of saying it would investigate whether or not people might be refunded. The FSCS was set up by the government to protect consumers if UK-regulated firms went bust. But while people who receive misleading financial advice are generally able to apply to the FSCS for compensation, it has told the BBC's Money Box programme that in this case, most LCF investors were given "incorrect information", not misleading advice.

That is a key distinction which it says means the majority of investors will not qualify for compensation. Potential investors say they were told by LCF marketing staff about how their money would be protected, that the mini-bond products they were investing in were regulated by the Financial Conduct Authority and that their money was safely invested in dozens of companies to spread the risk - none of which was true.

Source: BBC News Business