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FCA asks if it was “aggressive enough” with failed mini-bond firm

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FCA’s Andrew Bailey

FCA chief executive Andrew Bailey questions if the regulator could have been more aggressive in the way it handled the London Capital & Finance debacle.

He made the point while giving evidence to the Treasury select committee about the watchdog’s work practices.

Bailey was questioned on the lessons the watchdog has learned so far about the collapse of LC&F, which defaulted in January, where a total of 11,500 investors lost £237m.

In May the Treasury directed the FCA to begin an investigation into the circumstances surrounding the collapse of the firm and appointed Dame Elizabeth Gloster to lead the probe.

Yesterday the Treasury also announced it would review the wider policy questions raised by the case of LC&F.

During the evidence session Bailey questioned why the FCA’s interventions did not work and said internet marketing was a big challenge to face.

He said: “Anything I say now should not pre-judge the investigation by Dame Elizabeth Gloster.  I have been through the timeline of this story. The question which stands out for me is that the FCA intervened on five occasions with LC&F regarding financial promotions between 2015 and last year.

“Why did they not have the effect they should have had? There are a number of possible explanations such as the intervention was not aggressive enough and the risk warnings did not do the job.

“One of the big challenges we have in the mini-bond world is internet marketing. We have dedicated teams following this stuff. But the big question is what we can expect from internet companies Google, Facebook and the internet service providers?”

FCA chairman Charles Randell added: “Internet fraud operated out of a small office can do millions of pounds worth of damage to consumers. They are facilitated by search engines and social media platforms.

“We need a fresh look at this whole issue of internet fraud by small firms who are targeting vulnerable people who have been exposed to making complex financial decisions for the first time.

“The combination of the low yield environment and pension freedoms means the individual can take high risk investments. What you think about that depends on where you lie politically.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. The FCA is trying to do a snow job and evade its responsibility for its usual failure to take decisive action, despite continuous warnings from reputable market participants. This was not “internet fraud from a small office” but a product offered by an FCA regulated firm. The fact that the product itself was not an approved scheme is a technicality that ordinary investors can hardly be expected to understand.

  2. Julian Stevens 26th June 2019 at 8:13 am

    One is reminded of Martin Wheatley’s ill-judged sound bite that, under his leadership, the FCA “would shoot first and ask questions later” though, in practice, that never seems actually to have happened. With Andrew Bailey now at the helm, the wheel seems to have turned full circle, in that the FCA asks questions but holds back from taking any action until after the sherbert’s hit the fan. That’s about the measure of it, isn’t it?

  3. Aggressive ?

    I hardly think aggression is a precursor to solve anything and certainly (as we are all well aware) will never be a preventive !
    After Bailey’s predecessors, ill thought mission statements and more recent statements you would like to think better terminology, engagement, and a rethink on how behave and deliver a positive message to those they regulate would indeed yield better tasting fruit.

    People will never bow to tyranny and bullying, nor should be expected to, and those who seek to do harm see this as a weak barrier.

    If the FCA’s predicted response is to jerk the knee and pile in SAS style then its business as usual and the FCA results will not change.
    Like those before him and around him, he feels that the aggression and persecution they currently show is lacking so it needs to be increased some what.

    Stockholm syndrome, has not kicked in just yet Bailey et al, you and the FCA are far from being admired and respected.

    I know you are probably in the process of calling in favours to find another job (lets face it it wont be to difficult) so what have you got to lose ? do something different for a change and get the staff at the FCA to do their bloody job…instead of waiting for the doo doo to hit the fan, then reach for the bucket of water, funnel and hose pipe.

    Please ask yourself why 11,500 people lost a total of £237 million, if your sole conclusion is lack of aggression then you are a misguided nincompoop and certainly, not worthy of the job, salary and benefits you get.

    We know why they lost their money, crikey you were even told about it …..

  4. Julian Stevens 26th June 2019 at 5:03 pm

    Says Charles Randell: What you think about that depends on where you lie politically.

    And how often.

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