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.”