Syed Rahman of financial crime specialists Rahman Ravelli believes there is an urgent need for a review of the FCA.
The UK’s Treasury Select Committee has begun its inquiry into the Financial Conduct Authority’s handling of the London Capital and Finance scandal.
The Committee has begun taking evidence in relation to the approach taken by the FCA to London Capital and Finance (LCF); which collapsed in 2019 owing approximately 11,000 investors a total of £236 million.
LCF aggressively marketed its financial products, known as minibonds, through extensive social media advertising. But its investment strategy failed to produce the expected returns and has prompted an investigation by the Serious Fraud Office.
The Treasury Select Committee is to examine the role of the FCA. The FCA did regulate some of LCF’s activities but it has been accused of doing too little to protect the public from losing money in some of the investment company’s schemes.
The current Governor of the Bank of England, Andrew Bailey has given evidence to the Committee, as he was head of the FCA at the time of LCF’s collapse. The Committee has already taken evidence from Dame Elizabeth Gloster, the QC who headed the official investigation into the FCA’s handling of LCF and published a highly-critical 494-page report of it last year.
Mr Bailey stated that he was unaware of the scandal relating to LCF until the regulator stepped in to shut the mini-bond provider down. Due to the number of failings that have been identified - and following Mr Bailey’s evidence – there now seems to be a number of reasons why an independent review of the FCA is imperative. Mr Bailey has apologised and explained that he had inherited this problem. While the problem has been acknowledged by his apology, it has clearly not yet been addressed.