THE STANDARD of financial advice offered to consumers needs to improve to prevent scandals, rather than acting after the horse has bolted, according to MPs.
The 11-strong Treasury select committee made the comments as it heard oral evidence from Caroline Rainford, chief executive, and Jimmy Barber, chief operating officer, of the Financial Services Compensation Scheme (FSCS).
The hearing came just days after it was announced that investors who lost millions in the collapse of mini-bond seller London Capital & Finance (LCF) could be entitled to compensation, contrary to initial guidance given by the government’s financial redress scheme.
Asked about whether customers affected by the LCF scandal would be compensated, Rainford told the committee that there were protected claims that may result in compensation for some of the 11,500 investors.
She said the core activity of LCF’s mini-bond instrument was outside FSCS coverage, but added that they had worked with the administrator and listened to phone calls that led them to believe there were incidences where Surge Financial, acting on behalf of LCF, may have given misleading advice in certain cases.
Questioned about whether other e-money products should be brought within FSCS protection, Rainford told MPs it was up to the FCA to determine and that FSCS would adapt to any rules the regulator set.
However, she did stress that the FSCS does feed back information and discuss trends with the FCA and that if rules changed, the compensation scheme would follow as it would have been involved in previous discussions.
Peer-to-peer investments are not covered by the FSCS.