The Financial Conduct Authority (FCA) has revealed the nine lessons that it has learned from the collapse of mini-bond provider London Capital & Finance (LCF) last year.
Responding to an independent review of the regulation of LCF by Dame Elizabeth Gloster, the FCA said that it has accepted the recommendations directed solely at the regulator.
The nine key lessons are as follows:
1. That the FCA should take a more holistic approach towards authorising and supervising firms.
2. That all FCA call centre workers should refer any fraud allegations to the supervision division, and refrain from giving any advice or reassurance about unregulated companies.
3. That the FCA should provide training on how to analyse a firm’s financial information, and when to escalate certain cases to specialist teams.
4. That senior management should communicate all product and business model risks to frontline staff.
5. That the FCA should have a policy on how to deal with repeated regulatory breaches by financial services firms.
6. That the FCA’s culture and training should reflect its aim to combat fraud by authorised firms.
7. That all supervision data is held in the same electronic system so that any red flags can be spotted immediately.
8. That the Delivering Effective Supervision (DES) programme is fully embedded and operating effectively where it applies to the supervision of flexible firms.
9. That the FCA should consider whether it can improve its use of regulated firms as a source of market intelligence.
LCF went into administration in January 2019, and administrators are still working to recover any outstanding claims. Of the £237m believed to be owed to investors when the firm collapsed, just over £50m has been recovered to date.
“We accept all the recommendations that have been made to the FCA and we are profoundly sorry for the mistakes we have made,” said Charles Randell, chair of the FCA.
“The collapse of LCF has had a devastating effect on many investors and we will do everything we can to conclude our investigations as quickly as possible and support the recovery of further funds for investors.”