AN INDEPENDENT probe has been launched into the Financial Conduct Authority’s (FCA) supervision of London Capital & Finance (LC&F) and the circumstances surrounding the mini-bond provider’s collapse.
The Treasury said on Thursday that there will also be a wider policy review in response to the case, including a review of the regulatory regime for mini-bonds and other non-transferrable securities.
Dame Elizabeth Gloster, a renowned international arbitrator who was the first female judge of the Commercial Court and was also a judge of the Court of Appeal, will lead the investigation.
She will examine how the City watchdog exercised its powers and whether it fulfilled its statutory objectives, the Treasury said.
The FCA will report the investigation’s findings to City minister John Glen.
“We urgently need to get to the bottom of the circumstances around the collapse of LC&F,” said Glen.
“Dame Elizabeth will bring her vast experience and rigour to this important investigation, which will help ensure this type of thing doesn’t happen again.
“The Treasury will also be looking at how the current regime for these investments works, so customers are properly protected and the UK’s financial system can continue to be one of the safest in the world.”
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In March, the FCA’s board decided there should be an independent probe into the collapse of LC&F. FCA chair Charles Randell wrote to Glen to inform him of this decision.
“This investigation will establish what happened with LC&F and whether further changes are required,” said Randell.
“It will support the broader review of mini-bond regulation. Dame Elizabeth Gloster brings independence and extensive experience to the task, and the FCA will ensure that she has all the access and support she needs to conclude her work as quickly as possible.”
The FCA will also contribute to the wider sector review into mini-bonds announced by the Treasury.
LC&F went into administration in January after the regulator ordered it to halt its regulated activity and stop marketing products. The FCA estimates 14,000 people had invested £214m through the bonds.
The Financial Services Compensation Scheme (FSCS) is currently working with the FCA, administrators and legal experts to assess whether investors can claim compensation from the firm.
The P2P lending industry has been quick to distance itself from mini-bonds, arguing they are much riskier than P2P loans.