FCA: Regulator not necessarily to blame for consumers’ investment losses

RETAIL investment losses do not indicate failure from the regulator, a senior Financial Conduct Authority (FCA) official has said.

“If consumers only invested via a bank deposit account within the Financial Services Compensation Scheme (FSCS) limit, we could guarantee protection against any exposure to loss,” said Chris Woolard, executive director of strategy and competition at the City watchdog.

“But that would almost certainly not be the right answer for their pension savings, or for more sophisticated investors with the means to bear risk.

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“And when risk and return are higher, consumers can and will lose money – this does not necessarily imply any sort of failure from industry or regulator.

“The problem is that consumers now have the option to invest in high risk, high return products, even if they don’t have a sophisticated understanding of those risks.”

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Woolard said that in the coming months, the FCA will be engaging in a public conversation about the current regulatory model and will be publishing papers on its principles and the duty of care.

“Rightly, we don’t know exactly where this conversation will take us,” he said.

“But one thing is already clear – we are moving from a narrower compliance with the rules, to a focus on delivering the outcomes we want for the users of financial services.”

Woolard’s speech, delivered on Monday at the City of London/Cicero event on the future of regulation, comes at a time of intense scrutiny of the FCA. Questions have been asked about the watchdog’s regulatory abilities after the high-profile collapse of Neil Woodford’s funds, mini-bond provider London Capital & Finance and peer-to-peer lenders Collateral and Lendy.