A change in culture is needed at the City regulator, the Financial Conduct Authority (FCA), an influential committee of MPs has said in a new report.
Citing failings in the way the FCA handled the collapse of mini-bonds seller London Capital and Finance (LCF), the Treasury Select Committee report today called for the FCA to improve the way it protects consumers and investors.
LCF failed in 2019 after raising GBP237mln from around 11,000 small investors.
Mel Stride, who chairs the committee, said: “The collapse of LCF is one of the largest conduct regulatory failures in decades.”
He also called on the expediting of HM Treasury’s consultation into the regulation of mini-bonds and for measures to address fraud via online advertising to be included in the government’s recently published draft Online Safety Bill.
The committee said there was evidence of “over-reliance on collective responsibility”, which made it hard to see who was accountable.
The watchdog should become a more proactive, agile and decisive regulator, the committee also said, and needs to set a clear date for completing these cultural changes.
The committee’s report follows a review of the handling of the LCF collapse by Dame Elizabeth Gloster, a former appeals court judge, which found that the regulator failed to “effectively supervise and regulate” the company.
An FCA spokeswoman said: “We are profoundly sorry for the mistakes we have made over LCF and are committed to implementing the recommendations of The Gloster Report which are progressing at pace.
“The FCA has embarked on a wide ranging transformation programme to build a data-led regulator able to make fast and effective decisions.”
“We agree with the recommendation that fraud via online advertising should be included in the Online Safety Bill, as online platforms are now the single biggest channel of financial scams and fraud.”
PIMFA, the trade association for the wealth management and financial advice industries, welcomed the report.
“Our industry called on the FCA to act over London Capital & Finance repeatedly,” said Tim Fassam, PIMFA’s director of government relations and policy.
“A more agile, engaged and decisive regulator could have prevented the losses suffered by thousands of consumers as a result of what happened with LCF and it is encouraging that the current senior leadership of the FCA recognises. But as the Treasury Select Committee says in its report, the FCA must set milestones for change to be achieved.
“We also agree with the Treasury Select Committee that it is disappointing measures to address fraud via online advertising have not been included in the draft Online Safety Bill […] this is a missed opportunity to prevent another LCF-type event in the future.”