It seems that Capital + Merchant Finance may at last have dropped their advertising reliance on Lloyds good name. It was astonishing that Lloyds let it go on so long, however technically justified or correct the words might have been.

A month ago Jenni McManus in the Sunday Star Times reported (C5) on what persuaded some unfortunates to sink their savings into Bridgecorp. Bridgecorp material referred to Lloyds’ insurance of loan principal. She explained that the Lloyds “arrangement was highly conditional and applied to only 19 of Bridgecorp’s 69 major loans”.

Capital + Merchant Finance’s use of its Lloyds arrangements has morphed. It was prominent on their advertising until very recently. Page 9 of  last year’s prospectus gave detail of the cover. I could not work out from it exactly how the insurance for the company became an assurance of payment to debenture investors. The conditions of the insurance seemed tight (it would not pay more than $20m in any year, it covered a maximum of $3.5m of any loan, and only certain loans were covered).

The key question to me was what proportion of the loans fell outside the conditions. Perhaps it was stated and I missed it.

If I was thinking of putting money into Capital + Merchant (which I was not) I’d be wanting to know more about this Lloyds cover – and if I were from Lloyds I’d be checking to make sure that my name was not offering more comfort to investors than it should.

The law is strict on the use of ‘experts’ statements in prospectuses. Experts must consent to the form and content of their statement, and ensure the statements are not misleading.

Lloyds may not be an “expert” for this purpose, but if I had been Lloyds’ local eyes and ears, reputation concerns would have prompted a suggestion to Lloyds to make very sure they were comfortable about the advertising!