The Financial Conduct Authority (FCA) has received fresh criticism of its handling of the London Capital & Finance (LCF) scandal from an independent complaints commissioner.
The Financial Regulators Complaints Commissioner investigates complaints against organisations including the FCA, the Prudential Regulation Authority and the Payment Systems Regulator.
After looking into 426 complaints about the FCA’s handling of LCF, complaints commissioner Amerdeep Somal has shared a preliminary report with her findings to the regulator.
The majority of the complaints in the report, which was seen by The Times, were around the FCA’s decision to pay redress to only a small number of investors.
Mini-bond provider LCF entered into administration in January 2019, leaving thousands of everyday investors in the dark about the recovery of their funds.
The Financial Services Compensation Scheme (FCSCS) has already paid out £57.6m in redress to approximately 2,871 customers which it believes had bad advice but has stopped short of further payments.
Somal said the City regulator should reconsider its decision on the payments and criticised its refusal to make public its approach to ex gratia payments it issues to people for distress and inconvenience as a result of delays to its complaints handling process.
Read more: LCF administrators’ fees reach £6.2m
“The FCA’s approach to compensation in the LCF cases is unjustified and does not stand up to scrutiny,” Somal told The Times.
Somal also criticised the FCA for not contacting LCF investors individually when the Gloster Report into the crisis was delayed.
In late 2020, Dame Elizabeth Gloster published her report of the independent investigation into the FCA’s regulation of LCF. The Gloster Report highlighted FCA failings and made a number of recommendations, which the regulator said it was taking on board.
“This is not good enough and goes against the principles of being as transparent as possible, especially in a case such as this on a mass scale involving several complexities, entities and bodies,” she told The Times.
Somal will publish the final version of the report in mid-November and the City regulator has been given until then to comment.
The FCA has said that it has seen Somal’s preliminary report, will consider it and respond in due course but as it is not the final report, it will not publicly comment at this stage.
Somal’s report follows an announcement in the Summer that over 1,000 LCF investors had complained to the regulator about its failures in supervising LCF, which was escalated to the Financial Regulators Complaints Commissioner.
The investors said that the FCA has offered no compensation for its regulatory failures, receiving repeated warnings and tip offs but failing to intervene. They also criticised the regulator’s purported introduction of a previously unseen and narrow test of causation in its new proposed complaints scheme.
The Financial Regulators Complaints Commissioner has been contacted for comment.