FCA criticised over regulatory failings at failed firm

An independent report, carried out by Dame Elizabeth Gloster, into the regulation and supervision of London Capital and Finance (LCF) has criticised the regulatory failures of the Financial Conduct Authority (FCA).

The 500-page report into the firm, which collapsed in January 2019, slammed both the regulator and its former chief executive, Andrew Bailey, for failures in the regulation and supervision of LCF, which impacted over 11,000 people who had invested around £237m.

LCF reportedly sold risky “minibonds” that promised to pay investors high rates of interest, with many bondholders being elderly, relatively inexperienced in investing and having put their life savings into the high risk instruments.

The report said: “Bondholders, whatever their individual personal circumstances, were entitled to expect, and receive, more protection from the regulatory regime in relation to an FCA-authorised firm (such as LCF) than that which, in fact, was delivered.”

Among the report’s recommendations are support for the reform regime proposed for by the FCA and a commitment to launch a consultation next year on the regulation of non-transferable debt securities.

Charles Randell, the FCA’s chair, said: “There are a number of things we could have done better in our supervision of these two firms and both reports highlight the need for the FCA to continue to change to better protect consumers from harm.

“We accept all the recommendations that have been made to the FCA and we are profoundly sorry for the mistakes we have made.”

He added: “The collapse of LCF has had a devastating effect on many investors and we will do everything we can to conclude our investigations as quickly as possible and support the recovery of further funds for investors.”

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