Independence of investigations into FCA draws questions

Maria Nikolova

Where such investigations are conducted, HM Treasury take steps to ensure their independence which is crucial to the integrity of their conclusions, Lord Young of Cookham explains.

The recent launch of an investigation into the Financial Conduct Authority (FCA) and the events surrounding the demise of London Capital & Finance have sparked questions around the independence of such investigations.

Lord Myners has asked Her Majesty’s Government what tests they apply to determine whether an investigation into the Financial Conduct Authority (FCA) meets the standard required to be described as independent of the FCA; and what assessment they have made of whether FCA employees acting for an investigation compromises its independence.

In response, Lord Young of Cookham said that, where such investigations are conducted, HM Treasury take steps to ensure their independence which is crucial to the integrity of their conclusions. For instance, in the recent case of the events surrounding the failure of London Capital & Finance plc (LCF), and following a request from the Financial Conduct Authority (FCA), the Economic Secretary to the Treasury required that an independent investigation be carried out under powers in section 77 of the Financial Services Act 2012.

The Economic Secretary approved the appointment of Dame Elizabeth Gloster, an experienced QC and Judge at the High Court and Court of Appeal, to lead it. Prior to this approval, potential conflicts of interest were investigated and HM Treasury is satisfied that Dame Elizabeth is independent from the FCA, HM Treasury and the companies and individuals associated with LCF’s failure.

Under the terms of the Economic Secretary’s Direction to the FCA, Dame Elizabeth has the discretion to appoint a team which is entirely independent of the FCA, Lord Young said. A process is now underway to appoint an independent legal team to support Dame Elizabeth in her investigation. The FCA is also under a duty to facilitate the disclosure to Dame Elizabeth any information that she deems relevant to the scope of her investigation. Should Dame Elizabeth wish to raise any matters directly to HM Treasury, she can do so at any time, under the terms of the Direction, via an interim report, he added.

In July this year, Dame Elizabeth made her first announcement of how she will conduct the investigation. Dame Elizabeth aims to engage with bondholders, professional organisations and other interested parties in an organised and structured way so that she can address the issues which are relevant to her investigation.

Individuals impacted by the failure of LC&F will also be able to send any relevant information via email. The email address is [email protected] and will only be accessed by Dame Elizabeth and her independent team.

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