A complainant who says the FCA’s investigation into mini bond provider London Capital & Finance unnecessarily caused its inevitable collapse has had their review into the case quashed.
The complainant alleges the FCA’s moves against LC&F caused the loss of their investment in mini-bonds with the now-collapsed provider.
A total 11,500 investors lost £237m after LC&F fell into default in January.
This came a month after the regulator issued it with an order to take down promotional material of the bonds, ruling they were “misleading, not fair, and unclear.”
The complainant says LC&F should have continued to operate and the FCA launched its official investigation in the knowledge that the probe would cause the provider’s collapse.
Instead, the regulator should have worked with LC&F to resolve its problems, the investor complainant says.
The FCA argues it deferred its review of the complainant’s February claims as its own investigation of LC&F was still active.
The regulator says: “We are generally only able to begin investigating a complaint after any ongoing action is finished.”
In a final report, Complaints Commissioner Anthony Townsend says the regulator is within its rights to defer the complaint until it has concluded its own investigation into the mini-bond provider.
Townsend says the FCA sent “considerable information” to the complainant regarding its actions to secure LC&F’s assets.
The FCA also sent its public communications as to why the provider was under investigation, including a link to its supervisory notice on the issue.
Townsend says: “Although I am not in a position to make a judgement about the FCA’s actions in this particular matter, it is not unusual in cases of this nature for the regulator to have to make difficult decisions about how to protect the interests of both existing and future clients of a firm.
“Those interests may not be the same.
“I recognise that what you are seeking is a declaration that the FCA’s actions have caused your losses, but I am afraid that question will have to wait until your complaint is considered when the deferral ends.”
Townsend confirmed the FCA’s initial decision to defer the complaint would be upheld.
The FCA has also agreed to the recommendation to review the complaint every six months.
Townsend says: “It is unfortunate that that some investigations take a considerable period to conclude and for that reason, I consider that the FCA should undertake to review the federal of your complaint every six months so that they can begin to deal with it at the earliest opportunity.”
The collapse of LC&F has garnered significant interest in the effectiveness of rules to protect retail investors.
In response to this, the FCA confirmed last month that it would commission an investigation into its own supervision of the case to confirm whether existing regulation of mini-bonds do protect investors adequately.