UK Treasury Committee piles pressure on FCA over failure of London Capital & Finance

Maria Nikolova

Nicky Morgan requests that the FCA Board considers whether the failure of LC&F warrants a statutory investigation.

The developments around London Capital & Finance plc continue. Just a day after the UK Serious Fraud Office (SFO) announced the start of an investigation into several individuals associated with the ill-fated firm, the UK Treasury Committee has also made clear its stance on the matter.

Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, has today written to the FCA Board to request that it consider whether the tests around the need for a statutory investigation into possible regulatory failure surrounding LC&F have been met.

Whilst the promotional material is regulated by the FCA, the product itself – mini-bonds – are unregulated.

HM Treasury has the power to require the regulator to conduct such an investigation. Mrs Morgan has also written to John Glen MP, Economic Secretary, to urge the Treasury to use this power if the FCA declines to investigate.

Mrs Morgan commented:

“The FCA is currently investigating LC&F’s marketing material and the SFO is investigating individuals associated with the company.

“Yet there is a broader need to understand what can be learned in a regulatory sense from the events at LC&F.

“I have therefore requested that the FCA Board consider whether the failure of LC&F, the potential harm to those consumers involved, and the regulatory system that led us here, warrants a statutory investigation.

Let’s recall that London Capital & Finance has entered into Administration.

Earlier in March, The UK Financial Services Compensation Scheme (FSCS) said that London Capital & Finance plc had issued its own mini-bonds to investors on a non-advised basis and that, given that this activity is not a regulated activity under the Regulated Activities Order. Hence, this activity not FSCS-protected. For this reason, while the firm is insolvent, the FSCS is not accepting claims against the firm.

However, if the FSCS determines that there are circumstances that give rise to potentially valid claims, it will begin to accept claims against London Capital & Finance plc.

Mrs Morgan says:

“Even if the regulator does not conduct an investigation, the FCA Board should set out whether firms are using their FCA-authorisation in a way that may be misleading to consumers, whether consumers need greater clarity on what such an authorisation does to protect them, and whether mini bonds should now be regulated”.

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