The FCA has to show it really means business

 
James Booth
The Metropolitan Police And The Royal Marines Conduct Security Training On The River Thames
“The stream of censure comes at an inopportune time for FCA boss Andrew Bailey” (Source: Getty)

THE CITY watchdog is back in the doghouse again following the collapse of mini-bonds lender London Capital & Finance (LC&F).


Yesterday, Treasury Select Committee chair Nicky Morgan MP wrote to the Financial Conduct Authority (FCA) and the Treasury demanding an investigation into possible “regulatory failings” surrounding the lender’s collapse.

Read more: Nicky Morgan calls for probe into collapse of London Capital & Finance

LC&F went bust in December, putting £236m of customers' money at risk, including funds from many first-time investors who were told they were investing in a “fixed-rate ISA”.

The company paid Brighton-based agency Surge Financial a commission of 25 per cent to market the products on Facebook and Youtube – amounting to £60m.


In a letter to investors, LC&F’s administrator said once Surge’s commission was paid, LC&F would have to deliver returns of 44 per cent to keep its promises.

The company started selling products in 2015, but it was only in December that the FCA cracked down on LC&F, describing its marketing as “misleading, not fair and not clear”.

The FCA, which has said it will respond to Morgan’s letter, has also caught significant political heat recently for its handling of the Royal Bank of Scotland’s now defunct global restructuring group (GRG) scandal.

Read more: FCA hands £415k in fines to investment groups over float collusion

Last year the FCA said it lacked the powers to take action against RBS, despite finding that there was “widespread inappropriate treatment of customers by GRG”.

Morgan said at the time it was “bewildering for those who got caught up in GRG’s actions that the FCA is not able to act”.

Other victims of banking wrongdoing are also unhappy with the regulator. At the end of last year small businesses caught up in the HBOS Reading scandal complained about a voluntary compensation scheme permitted by the FCA.

Read more: Nicky Morgan ducks investigation into Treasury role in RBS GRG unit

It has also come under fire for its record on whistleblowers, including a perceived let-off for Barclays boss Jes Staley last year. In January reports claimed the FCA had even mishandled an internal whistleblower complaint of its own.

The stream of censure comes at an inopportune time for FCA boss Andrew Bailey, the former Bank of England official tipped to succeed Mark Carney. With Carney due to depart next January, Bailey's prospects surely depend on a sharp turnaround of the watchdog's performance.