The Financial Reporting Council, the regulator of auditors, accountants and actuaries, has launched investigations into three audit firms over their audits of collapsed mini-bond firm London Capital & Finance plc (LCF).

The FRC will probe the handling of the audits by PWC, EY and Oliver Clive & Co.

The regulator says it has established three investigations into the audits of London Capital & Finance for the one month period ended 30 April 2015 (carried out by Oliver Clive & Co.), the year ended 30 April 2016 (carried out by PwC) and the year ended 30 April 2017 (carried out by EY).

The investigations will be carried out by the FRC’s Enforcement Division under the Audit Enforcement Procedure.

An independent investigation in to the handling of the affair by the Financial Conduct Authority has already been ordered.

The probes come as the potential compensation bill for the collapse of mini-bond firm LCF soars.

More than 11,000 clients were hit by the collapse of the firm.

The Financial Services Compensation Scheme recently blamed potential claims from the London Capital & Finance mini-bond scandal for an additional £44m cost in its £649m 2020/21 budget proposals.

This is despite the fact that many LCF investors’ claims are likely to be rejected as outside the FSCS remit, according to the FSCS. Even so the body says it has had to set aside £44m to deal with potential claims. A number of legal cases are already under way.

The FSCS has so far paid £3.3m to 169 LCF customers who invested in LCF mini-bonds following transfers from stocks and shares ISAs. As this was a regulated activity the FSCS paid these claims immediately.

Questions have been raised, however, over whether all or just some of LCF’s products were regulated.

The compensation so far paid has helped only a small proportion of the 11,600 LCF customers, “mainly of retirement age”, who invested £237m with LCF. These claims are still being considered by the FSCS.