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FCA chief should step down over collapsed mini-bond firm, says cross-party group of MPs

Big Ben with the houses of parliamentMPs from across the political spectrum have backed a call for the chief executive of the FCA, Andrew Bailey, to step down following the collapse of mini-bond firm London Capital & Finance.

The incident saw over 11,000 bondholders lose more that £230m.

An early day motion put forward on 1 April states:

“This House… believes that, as London Capital and Finance was an FCA-regulated company, the chief executive of the FCA should resign for presiding over the biggest financial scandal of recent years, which is likely, according to the administrators, to result in more than 11,000 bondholders losing all or most of their money.”

FSCS apologises for misleading clients of collpased mini-bond firm

The primary sponsor of the EDM is Labour MP for Birmingham, Hall Green, Roger Godsiff. Along with five more sponsoring MPs from Labour, the Democratic Unionist Party and Conservatives, there are 10 MPs, including from the Green Party and Liberal Democrats, who have signed in support of the EDM.

The FCA committed to commissioning an investigation in to its own supervision of the collapsed mini-bond provider.

Its investigation will also cover, whether the existing regulation of mini-bonds protects retail investors adequately.

Investor blames FCA for losses after mini-bond firm collapse

LC&F fell into default in January, a month after the FCA issued it with an order to take down promotional material of the bonds, ruling they were “misleading, not fair and unclear”, as they were not eligible for Isa status as claimed.

The early-day-motion states the regulator seems to have failed to act on warnings about the firm:

“This House… expresses alarm that documentary evidence has come to light which shows that the FCA was alerted to the activities of London Capital & Finance back in November 2015, but the FCA still went ahead and gave the firm a FCA-regulated accreditation on 7 June 2016, albeit for only the promotion part of their activities, which enabled London Capital & Finance to raise money from bondholders by marketing themselves as FCA-regulated in their promotional literature.”

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. It all very well MP’s jumping up and down calling for resignations when (not just the chief) the regulator hierarchy continue to fall on their own swords.

    The continuing re-arrangement of the deck chairs will not keep this old tug boat afloat, it continues to bounce of and on disasters that have already come to pass, when what is really needed is for MP’s to be looking beyond the harbour walls and over the horizon; drill a big hole in the hull of “HMS UK regulation”, watch it sink to the bottom amongst the escaping bubbles of air, then build a ship for the 22nd century which will lead from the front for us all to follow, heading off problems before they happen.

    • Julian Stevens 20th May 2019 at 7:23 pm

      I don’t think any of us want to wait another 80 years for a regulatory ship that’s fit for purpose. Action and results are needed now.

      • I think you miss my point Julian, we need regulation for the future, now !

        There is little point building something for today if its out of date by next week, which is why the FCA are forever sweeping up after the event.

  2. Shouldn’t the heads of all those who carried the adverts face investigation, seeing as they promoted the ‘investments’?

    Also, what about ALL parties involved. The money must have gone somewhere. £230m doesn’t just disappear.

    At times, it feels like we miss the real issue and look for an easy scapegoat.

    If nothing else this (and the BSPS UCIS investment issues) should focus minds on the unregulated nature of some investments being promoted to the public and the fact the public seem to be blissfully unaware of the risks they are taking.

    There’s regulation to stop it BUT, as with anything, where there’s a will they will usually find a way.

  3. My dog passed a motion the same day and will have much the same effect as this one…

  4. Julian Stevens 20th May 2019 at 4:38 pm

    If Bailey’s going to get the boot, as did his predecessor, then surely Sants should be stripped of his knighthood for having presided over the biggest mis-selling scandal in history (PPI)?

  5. This will no doubt scotch his chances to replace Carney.

  6. Julian Stevens 21st May 2019 at 8:15 am

    Let it not be forgotten that the head of the TSC, Nicky Morgan, had to threaten Bailey with formal proceedings for contempt of Parliament over his refusal to provide it with the full and unredacted version of the FCA’s report into the near collapse of RBS, on the grounds that it couldn’t do so without permission from the directors. Eventually the full report WAS forthcoming, but one wonders what influences were at work which gave Bailey the idea that he could effectively defy a command from the TSC, given the FCA’s claim that “We are an independent financial regulator, accountable to the Treasury and Parliament. We appear before Parliament’s Treasury Select Committee (TSC) in a general accountability hearing twice a year to scrutinise all aspects of our work. We also regularly give evidence to the TSC and other Parliamentary committees.”

  7. Perhaps polititions should take responsibility for their own/their departments screw ups.

    It is a long time since Crichel Down.

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