Out of touch: FCA does not understand FX industry dynamics; allows crooks into advisory capacities

London is, and will always be the global center of institutional and retail OTC electronic trading.

Of that there can be no question, and the level of developed sophistication of its trading environment, right the way from the Tier 1 banks which dominate the entire global FX industry in terms of market share, to the service providers that connect the world’s markets to the Square Mile, to the expertise within the retail FX companies.

It is testimony to the leadership abilities of the senior executives within London’s diversified and specialist FX industry that London is such a bastion of electronic financial markets excellence.

It is, however, absolutely not down to the regulatory authority that issues licenses.

The Financial Conduct Authority (FCA) may well have a reputation across the world which marks it out as a benchmark for regulatory environments, however to consider the FCA to be the reason that London-based companies are preferable in terms of commercial partnerships and direct retail custom would be to do a grave disservice to the corporate prowess of London’s financial services industry.

The FCA is quite simply out of touch with the modernity of the financial sector which powers not only the UK, but the entire world.

Unlike Australia’s ASIC or North America’s NFA, the FCA can be likened to an old school tie network, consisting of unaccountable bureaucrats who do not understand the highly complex and sophisticated structure that has been built by the fine quality firms to which it issues licenses.

Indeed, last year, the FCA’s consultation paper which stated the regulator’s intention to cause unnecessary collateral damage to a core product – Contracts for Difference (CFDs) – that are a mainstay of large retail electronic trading firms with a 30 year history and a highly loyal client base that does not issue complaints, and is largely based within the domestic market.

Put simply, there was absolutely no need whatsoever for the FCA to have taken the stance it took, apart from the perception by many FX industry senior figures with vast experience that the lobbying attempts by the exchanges to gain the FCA’s leverage to attempt to create a non-viable environment for the OTC world so that the uncompetitive and archaic chambers of Paternoster Square could gain a chunk of the retail market.

This, if it can be leveled at a government regulator, is a form of minor corruption, an element which is almost non existent in British business.

Britain is one of the world’s least corrupt countries, and its fantastic, modern, free and flourishing business environment is testimony to that.

Today, a further example of the out of touch nature of the FCA came to light, that being the perplexing situation that whilst the regulator simply does not understand the level of quality and development in our industry, it focuses on actually issuing licenses to firms that would be considered black market entities in many other jurisdictions.

An example of this is the FCA’s toxic association with the rather appropriately named Peter Crook.

Crook by name and by nature, this particular individual held, until last week, the head position at door to door loan firm Provident Financial.

In many regions of the world, door to door loans and ‘payday loans’ with eye watering interest rates that in some cases exceed 2,000% (!!!!) are illegal, yet in Britain, the FCA actually licenses them.

Last week Mr Crook left his position as head of Provident Financial, not over its activities toward retail clients but as a result of profit warnings and card protection products.

Perhaps the most alarming aspect is that Mr Crook was allowed to continue this business despite the regulatory brow-furrowing, because apparently Mr Crook has been a member of the FCA’s practioner panel which helps draw up policies.

So, let’s take a step back and actually think about this for a second.

The FCA makes a conscious attempt to do damage to the very legitimate and very well established British CFD industry without any reason, fails to rein in binary options fraudsters and writes off 97% of all complaints by asking for a settlement with a discount and does not conduct any compliance inspections, yet allows a back street moneylender to advise on policy.

Yes, the FCA may have the reputation as the finest regulator, but this is down to the companies that it presides over which uphold the standard, and not the regulatory environment itself.

As a member of the FCA’s practitioner panel, Mr Crook, who has earned £30 million in the last five years, helped draft monthly reports for the watchdog and enjoyed informal access to directors. He quietly gave up the post yesterday.

The FCA has spent months looking into Provident’s card division Vanquis Bank over the sale of repayment option plans allowing customers in financial trouble to freeze accounts without incurring extra interest

Although the business refuses to say when it was informed an investigation started, it stopped selling the product in April last year at the FCA’s request.

The status of regulators should be on their own merit, and not created due to basking in the shadow of the high level of business acumen demonstrated by the quality FX firms in their region, and similarly, in the case of Mr Crook and the FCA board, a gentleman can be judged by the company he keeps.