Shearman & Sterling is acting on behalf of clients who invested in mini-bonds sold by the failed LCF firm which collapsed in January 2019.
The FSCS has responded by insisting that it is undertaking a “wide ranging investigation” into claims for compensation after LCF failed.
Earlier this year the Financial Services Compensation Scheme made the first pay-outs - totalling just under £2.7m - to 135 victims of the LCF mini-bond firm collapse however many thousands of other victims remain in limbo because they may not be eligible for compensation under FSCS rules.
Because the mini-bonds were seen as loans rather than investments they are potentially outside the remit of the FSCS.
The FSCS said earlier this year that it could not help 283 other London Capital & Finance victims because they became customers before the firm was authorised in June 2016. A total of 11,600 investors were hit by the £236m collapse of ‘mini-bond’ firm London Capital & Finance (LCF).
Commenting on the application by Shearman & Sterling for a judicial review, James Darbyshire, FSCS general counsel, said the case was a challenging one but the FSCS had sought to be fair to everyone and had also taken the unusual step of dropping any cost orders in its favour against investors.
He said: “We appreciate LCF is a complex and sensitive case affecting a large number of investors who are keen to understand our decisions.
“FSCS has undertaken a thorough and wide-ranging investigation to determine whether LCF carried out any regulated activities that we might be able to compensate for. This has included significant factual analysis and consideration of some complex legal and regulatory issues.
"FSCS has been transparent and cooperative in discussing the legal issues with the investors and will continue to do so. To ensure that the investors' real concerns are fully addressed, we have taken the unusual step to agree not to seek to enforce any costs order in our favour against the investors.”
He pointed out the FSCS is an impartial service and is “operationally independent” from the financial regulators.