Protestors rallied outside the UK regulator’s headquarters in Stratford this week over a slew of perceived regulatory failures. This is being spearheaded by campaign group Transparency Task Force, which says the FCA has failed consumers in a number of areas.
Among the controversial cases that the TTF has again highlighted at the rally are the now infamous Woodford case, where the FCA itself removed investors’ rights and statutory protections that had previously been enshrined in the 2000 Financial Services and Markets Act. In addition, the FCA has attracted criticism of the way it handled the collapse of wealth manager WealthTek LLP, including its management of a whistle blower.
What does the TTF want from the FCA?
The TTF is calling for the introduction of a civilly actionable duty of care owed to consumers by authorised firms and individuals or the addition of a private right of action and the removal of unnecessary loopholes from the FCA’s Consumer Duty. It also wants to see the right to compensation, if necessary through the courts, if consumers lose money as a result of regulatory failure or unwarranted inaction by the FCA.
The TTF is also demanding governance improvements at the FCA. This includes the creation of a consumer-led oversight body to make key appointments, set budgets, review performance and ensure complaints are handled effectively.
“Just this week, the FCA admitted its Chair, Ashley Alder, failed to keep confidential the names of two of its employees who blew the whistle – but the investigation, undertaken by one of the organisation’s own directors, was consequence-free for Mr Alder, an experienced lawyer and regulator who should have known better,” said Andy Agathangelou, founder of the Transparency Task Force. He added that “the FCA has a habit of marking its own homework.”
“We are living in an era when politicians understandably are looking to our financial sector to deliver economic growth,” the TTF founder explained. “They’re going to be disappointed unless they first tackle the immediate cause of its anaemic performance in recent years, namely consumers and overseas regulators and governments being distrustful of the City because levels of wrongdoing are too high and therefore being reluctant to transact with it and give it privileged market access respectively. And that trust deficit has at its root in lax, opaque and unaccountable regulation.”
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Also involved in the rally was former FCA employee Jasthi Alom, who is challenging the regulator in the court. He said: “This rally is crucial because the equation is simple: better regulation requires a better regulator. Systemic reform of the Financial Conduct Authority is urgently needed. Without it, the FCA risks becoming the next major public catastrophe – a crisis they are already teetering on – and much like the Post Office scandal, it will lead to devastating consequences, including financial losses, ruined lives, and even suicides.”
Cover up over London & Capital
The FCA is also taking flack over the way it handled the collapse of London & Capital Finance. A report from Dame Elizabeth Gloster has explored the regulatory role in and response to the sale of some £237m of unlisted bonds by London & Capital to consumers, a matter that is now under investigation by the Serious Fraud Office.
Dame Gloster concluded that “the FCA did not discharge its functions in respect of LCF in a manner which enabled it effectively to fulfil its statutory objectives… the Bondholders… were entitled to expect, and receive, more protection from the regulatory regime in relation to an FCA-authorised firm (such as LCF) than that which, in fact, was delivered by the FCA.”
Dame Gloster also criticised “the FCA’s delays and errors in providing documentation to the Investigation Team” and the representations made by it during the ‘Maxwellisation phase’ of the report’s production, especially in relation to demands “to delete references to ‘responsibility’ resting with specific identified/identifiable individuals”.
FCA to address transparency demands
The issue of transparency was recently addressed by Therese Chambers, joint executive director of enforcement and market oversight at the FCA. Speaking at a financial industry conference earlier this week, she said of the regulator’s current consultation on transparency: “While consumers’ groups, whistle blowers and some other regulators welcomed the prospect of greater transparency, the companies we regulate were overwhelmingly against. So first, let me assure you all: we are listening. We have analysed each and every one of the more than 130 responses to our consultation. And we are not going to rush this.”
At the moment, bar ‘exceptional circumstances’, the FCA is silent during the period between looking into a potential issue and reaching an outcome. What that has meant in practice, is that ‘exceptional circumstances’ has usually translated into ‘computer says no’ in response to requests for further information. “We put forward a proposal for greater transparency on our investigations into firms, where it was in the public interest,” Chambers said.
The FCA has said this autumn it will intensify its engagement – meeting with trade associations, firms, those on all sides of the debate – exploring how it can develop its proposals. “As part of this, we recognise the desire for greater definition on any new public interest test,” Chambers said.
“Later this autumn we plan to provide greater detail on how it could work in practice,” she told conference delegates. “To bring this to life, we will publish case studies examining how the criteria might apply and what announcements could look like, as well as more information on the numbers of cases that might be affected.”
