LCG could be forced into £7.7m payout
Spread betting business could be forced to pay up to £7.7m in compensation over a spot FX fund from 2009.
The London Capital Group (LCG) could be forced to pay compensation to the tune of £7.7m after a new assessment was made by the Financial Ombudsman Service (FOS) with regards to customer complaints about commission rebating of a spot FX fund set up in the first half of 2009.
An LCG statement this morning said it had initially thought the financial impact on the group would “not be material” with so far only one client incurring costs of £100,000, however it added that a revised assessment from the FOS was received on 11 February and that losses incurred by all of the clients in the fund could amount to approximately £7.7m.Reports suggest that it is now possible that as many as 112 other clients could be entitled to compensation.
“On the basis of a previous decision given by the FOS in respect of this case, we had expected that the impact of the FOS enquiry would be immaterial on the business,” explained the report from the financial spread betting company.
According to reports from financial publication IFA Online, the problems allegedly arose because “clients’ accounts collectively were overstated,” with prosecuting lawyer Alasdair Sampson suggesting that “this effectively geared the trading so all the accounts were over trading so any losses were exaggerated.”
The proportion of the loss for which LCG could be liable, as well as the date when payments would be required, is as-yet-undetermined. Nevertheless, the group today issued assurances that it possesses sufficient resources to meet a liability for up to the full amount of the fund.
LCG has insisted it no longer participates in any funds similar to the one in question, and has not done so ever since the closure of this particular fund in 2009.
LCG chief executive Simon Denham was unavailable for comment at the time of writing.