London Capital faces £7.7m client bill

Spread-betting firm London Capital, which operates as Capital Spreads and also provides platforms for the likes of Paddy Power and PartyGaming, could be forced to pay out up to £7.7 million by the financial ombudsman.

In a surprise ruling the regulator said London Capital must repay £100,000 a client lost on a third-party currency fund run by the now defunct UK Integrity Group. A further 114 clients who also lost money could now claim up to £7.6 million.

London Capital had already admitted that it made errors administering clients of the fund but argued it was not responsible for the losses. UK Integrity went into liquidation in October 2009 and was understood to have been under investigation by the Financial Services Authority for mis-selling.

Simon Denham, London Capital's chief executive, said: "We are surprised and disappointed by the decision, especially in light of the previous correspondence we had received from the ombudsman. We are studying the report before deciding whether to refer the adjudicator's decision to the ombudsman for review."

London Capital said it had "sufficient resources" to meet the full amount of claims. It ended 2010 with cash of £14 million. Its shares dropped 3½p to 95½p.