Thursday 23 January 2020 6:07 pm

Incoming BoE head Andrew Bailey to be grilled by LCF mini-bond investigation

Incoming Bank of England governor Andrew Bailey will be interviewed about his oversight of collapsed investment firm London Capital and Finance (LCF), an independent investigation said today.

LCF collapsed in January 2019, leaving 11,600 investors who bought its mini-bonds facing collective losses of up to £237m. 

While LCF itself and its marketing material was regulated by the Financial Conduct Authority (FCA), which Bailey has led since 2016, the bonds themselves were not. 

The circumstances around the company’s failure are being investigated by the FCA and Serious Fraud Office. 

At a meeting of around 100 bondholders in central London today, Dame Elizabeth Gloster, who is leading a probe into the watchdog’s handling of the case, was told by one bondholder that he felt the FCA had “let him down”. 

Gloster told the meeting her investigation would interview Bailey, who is due to take over as governor of the Bank of England in March, about his oversight of LCF.

Several investors who spoke at the meeting expressed confusion over the distinction that, as one put it, “a company can be regulated by the FCA, but its products are not”.

One bondholder said he thought the regulator “was going to look after” him following the collapse of LCF, while another said said she had seen the FCA’s logo on LCF’s website a week before the firm went into administration. 

“I thought [the logo] must mean it was regulated and safe,” she said. 

Earlier this month, the Financial Services Compensation Scheme (FSCS) said that just 159 LCF investors would be eligible for compensation.

Several investors who spoke at the meeting raised the issue of compensation, with one saying the FSCS “seem to be offering the least they can”. 

“I blame the FCA totally for the loss of my money,” he continued. “We lost our savings and probably our funeral money. Everyone should be entitled to receive compensation.”

Gloster told the meeting that the process of gathering documents for her investigation was nearing completion, but there had “unexpected delays in obtaining documents from the FCA” and some were still outstanding. 

“I am not sure the FCA appreciated the scale of the task from the outset,” she said.

The independent investigation is due to report its findings by July. Gloster told the meeting her team was on track to meet the deadline, but this was dependent on the FCA providing it with the documents it had requested.  

An FCA spokesperson said: “We note that Dame Elizabeth described the FCA’s approach as very accommodating to the review’s requests. This has certainly been our approach throughout in the spirit of full transparency.”

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