UK watchdog investigates audits of London Capital & Finance

[LONDON] Britain's accounting watchdog said on Wednesday it has started three investigations into audits of London Capital & Finance (LCF), the investment firm that collapsed in 2019 and left 11,600 investors facing losses of up to £237 million (S$411.9 million).

The Financial Reporting Council (FRC) said the first investigation will look at a one-month period that ended April 30, 2015, which was audited by Oliver Clive & Co.

The second investigation covers the year ended 30 April, 2016, which was audited by PwC, and the third probe looks at the year ended 30 April, 2017, audited by EY.

The FRC has powers to fine audit companies and ban auditors.

LCF went into administration in early 2019 after the Financial Conduct Authority (FCA) directed the firm to withdraw promotional material for the sale of mini-bonds that raised funds for small companies.

The FCA, whose handling of LCF is the subject of an independent review, last week announced a permanent ban on selling mini-bonds to retail investors.

LCF and marketing were regulated by the FCA, but not the mini-bonds themselves.

Britain's Serious Fraud Office opened an investigation last year into individuals associated with LCF, broadening it out this month to cover investments made from 2013-2018.

Most of the bondholders are not eligible for compensation and are taking the Financial Services Compensation Scheme to court in a bid to change this.

REUTERS