View more on these topics

FCA defends ‘serious register errors’ in clone firm case

Euros-EU-Money-Currency-Europe-700x450.jpgThe FCA has confirmed it will not accept a recommendation to compensate an investor who lost money to a clone of a deauthorised firm which was incorrectly marked as registered by the FSA for 12 years.

In the final report of the case to the Complaints Commissioner, the FCA says it provided appropriate guidance on the investor’s queries last May, which they chose not to follow.

Commissioner Anthony Townsend says the investor complainant spoke with an associate in the FCA’s Customer Contact Centre last May to confirm Firm X was a regulated entity.

The complainant was a prospective investor in Firm X and allege they were informed it was a subsidiary of an Austrian group.

Complaints Commissioner sides with FCA over late fees charge

The complainant says the FCA confirmed it was regulated to operate in the UK on its current passporting arrangements.

A total of £13,000 was invested into Firm X by the complainant, who subsequently lost the money when it turned out fraudsters had cloned Firm X.

The FCA disagrees it is to blame, arguing the complainant had invested without awaiting a response from the Austrian regulator as it had recommended.

Austrian regulator Bundesministerium Für Wirtschaft Und Arbeit had notified former UK regulator the FSA that the passporting rights for Firm X should be revoked in 2006.

When Firm X had been registered in the UK in 2005, the FSA had accidentally reversed the order of the firm’s name.

Instead of de-registering Firm X in 2006 after contact from the BFWA, the FSA registered the firm under its correct title, creating a second firm by accident and failing to de-register the first.

MPs eye post-Brexit ‘passporting’ outside EU

Concerns about cloning began to emerge in 2018 after it was discovered there were two registered passport firms that were both Firm X when there should not have been any.

One Firm X was de-registered in 2018 and the other in February this year during which time the firm was also cloned by fraudsters.

Townsend says: “There were therefore two serious errors made by the FSA: Firm X was registered under the wrong name and instead of being de-registered, a second entry was made.”

The regulator had been aware Firm X was a risk for cloning however.

The Commissioner says the FCA had received notification that fraudsters could be targeting Firm X but that “due to timings it was unlikely that the FCA would have had an opportunity to issue an alert on the Financial Services Register prior to [the complainant’s] call to the CCC and them transferring their funds.”

The complainant later became aware FCA’s knowledge of the potential cloning of Firm X after accessing a Freedom of Information request.

Profile: The complaints commissioner on regulating the regulators

Their initial complaint to the regulator was knocked back with the FCA saying it was “unfortunate” the CCC associate did not explain the passporting arrangements covered insurance related activities rather than savings ones.

The FCA says: “This still would not have had a bearing on your complaint as the advice from the associate to contact the Austrian regulator would still have been the best course of action to take.”

In the final report, he adds that the associate explained Firm X had passported into the UK from Austria and explained the home regulator was the BFWA.

“In the call during the conversation [the complainant] asked twice what they should do and both times were informed they should contact the BFWA and ask what permissions this firm had and what products it was authorised to offer.”

The CCC associate also advised the complainant to contact the Financial Services Compensation Scheme to ascertain whether it covered Firm X.

Townsend concludes: “Ultimately, you have lost your investment to fraud. However, it appears the failures of the regulator have been a facilitator to the criminal activity, and contributed to your decision to make your investment.

Nic Cicutti: FCA misses chance to show it’s on consumers’ side

“The FCA register entry for this firm was seriously inaccurate. If it had been deregistered in 2006, you might not have lost your investment in the way you did.

“Had the firm not been erroneously shown on the FCA’s register it could not have been cloned in the way it was; and that the FCA CCC did not uncover the extent of the regulatory failings.”

The Commissioner recommended a payment to the complainant of 50 per cent of the loss – £6,500 – but this has been rejected by the FCA.

In a response to the final report, the FCA says: “The complainant received sensible guidance from the FCA before investing, which was not followed. As the Commissioner notes, had the guidance been followed, the complainant would not have lost their investment in the way that they did. In the circumstances, we do not think an ex gratia compensatory payment is appropriate.”


Fairstone secures £200m FUM with Leicester purchase

Consolidator Fairstone has acquired Leicester-based Brett & Randall Financial Services in its second acquisition for 2019. The deal was completed under Fairstone’s downstream buy-out model which integrates independent firms into the group. Brett & Randall specialises in investment and retirement portfolios and will bring 420 clients under the Fairstone umbrella. The consolidator also secures a […]


What must the RDR and FAMR reviews achieve? Industry heavyweights weigh in

With the FCA publishing a call for input on how it should approach its reviews of the RDR and the Financial Market Advice Review, has the regulator got its focus points right? Too many customers are making big decisions alone It’s clear many consumers are left making big financial decisions on their own or are […]

The squeezed middle: can mid-sized firms adapt to survive?

For financial advisers, coping with change is a way of life – whether that is driven by the regulator, shifting consumer demands, technology or a combination of all three. Since the RDR came into force in 2012, the reshaping of the sector has been particularly dramatic, and with Mifid II last year there has been […]


Graphic content – May; UK economic data has finally turned for the worse

In June 2016, immediately before the Brexit referendum, a curious thing happened. Despite the colossal uncertainty facing the UK, economic data actually started to come in above consensus forecasts. Citi’s economic surprise index nudged into positive territory, which meant that UK economic data had on the whole outperformed consensus forecasts over the prior three months. […]


News and expert analysis straight to your inbox

Sign up


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

  1. Philip Castle 15th May 2019 at 1:04 pm

    So what this proves is what is good for the F-pack goose is not good for the gander.
    Advisers have an unappealable (A JR is not an appeal) process through the FOS which can see an adviser forced to pay £350k now for something which a court would not uphold, while anyone who complains about the FCA and i’s actions can be threatened with legal action if they disclose without the FCA’s permission an apology by them)I have the recording of being advised that if I DID get an apology, it would not be public and if I did make it public I was “advised” I should take legal advice before doing so) and now we see that a complaint to the Complaints Commissioner is no “due process” it is just an opportunity for the FCA to accept his decisions of they agree with them and reject them with no further recourse if they don’t.
    Dregs are found at the bottom and scum at the top.

    • Julian Stevens 16th May 2019 at 9:15 am

      I imagine that the advice of any lawyer who knows how this country’s regulatory system works would be that it’s a rigged deck and the FCA holds all the cards.

  2. Beggars belief

  3. John Stirling 15th May 2019 at 6:37 pm

    I think the FCA are genuinely trying to change, and trying to engage more proactively with us, the regulated.

    This, sadly, is an example of the sort of behaviour which needs to change.

    It is impossible to see how an equivalent error by a regulated entity would not result in full restitution. However it is not the judgement that is an issue for me. I don’t mind the FCA being immune to financial disaster, since it is ultimately just another bill for the regulated – and sooner or later there would be a bill in the billions if they offered a chink in their armour. But I do want to feel that the FCA are learning their lessons, and taking responsibility for their actions, and treating their customers fairly, and acting with integrity and transparency. It is said that a public get their police service they deserve, i think it is more of a two way street, in that both influence the other. Our regulator needs to lead the way with standards of behaviour. This is not a good example.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm