FCA calls for probe by independent person into issues related to London Capital & Finance failure
The investigation would examine whether the current regulatory system adequately protects retail purchasers of mini-bonds.
The UK Financial Conduct Authority (FCA) says there has to be an investigation by an independent person into the issues raised by the failure of London Capital & Finance (LC&F). The stance of the regulator was made clear today.
According to the FCA, the investigation should cover questions in two areas:
- whether the existing regulatory system adequately protects retail purchasers of mini-bonds from unacceptable levels of harm;
- the FCA’s supervision of LC&F.
The FCA Board decided that the regulator should ask the Treasury to use its formal powers to direct the FCA to commission this review, as this will ensure that the review has a broad and comprehensive remit.
FCA Chair Charles Randell wrote to the Economic Secretary to the Treasury, John Glen MP, to inform him of this request, and the Economic Secretary has agreed that such a direction should be given. Information about the detailed terms of reference of the review and identity of the independent reviewer will be published in due course.
Let’s recall that, in late March, John Glen, Economic Secretary to the Treasury, said that the Government takes the failure of London Capital and Finance very seriously and is closely monitoring current developments.
John Glen noted the recent launch of an investigation into individuals associated with LCF by the Serious Fraud Office.
The marketing and promotion of minibonds, such as those sold by LCF, are already subject to financial promotion restrictions outlined in the Financial Services and Markets Act 2000. In the UK, responsibility for regulating the promotion and marketing of minibonds lies with the FCA, and firms that fail to meet any of the relevant requirements may be subject to enforcement action. Whilst the promotional material is regulated by the FCA, the product itself – mini-bonds – are unregulated.
Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, has urged the FCA to consider opening a statutory investigation into possible regulatory failure surrounding LC&F. HM Treasury has the power to require the regulator to conduct such an investigation. Mrs Morgan has also written to John Glen to urge the Treasury to use this power if the FCA declines to investigate.