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FCA to be probed on knowledge of DFM Beaufort’s collapse

The Complaints Commissioner has labelled the FCA’s response to a request for information on collapsed discretionary fund manager Beaufort Securities “not acceptable” and is calling for the disclosure of the watchdog’s files to carry out further investigation.

Commissioner Anthony Townsend says he will use the files to establish a timescale of the FCA’s knowledge of, and action against, the DFM in the months leading up to its collapse if it does not re-investigate a complainant’s request for information.

final report on the partially upheld complaint this week shows that between March and May, a complainant asked the FCA a series of questions about its awareness of allegations against Beaufort dating back to 2016.

The questions also included a request for a breakdown of the action the FCA planned to take if the claims could be confirmed.

The complainant alleged the FCA “failed to act in a timely manner in that many months passed after serious questions were raised by a journalist who accused Beaufort of fraud.”

The FCA noted awareness of the correspondence on 10 May and on 23 August outlined its regulatory action against Beaufort to that date.

The regulator also referred the complainant to its Frequently Asked Questions page.

FSCS: Beaufort Securities shows we do more than just compensate

Two thousand Beaufort clients are still awaiting refunds from the Financial Services Compensation Scheme, which last month partially blamed its incoming £69m levy on paying out the 17,500 affected clients of the DFM.

The complainant is identified as a Beaufort investor.

Townsend says: “The FCA treated your questions as a Freedom of Information request and on 10 May 2018 replied that it was aware of the allegations made. Further detail about the insolvency administration and the distribution plan was provided as well as detail of the FCA’s media monitoring practices concluded was reasonable [by the complainant] in the circumstances in August.”

Townsend did not uphold this part of the complaint regarding protocol, saying the May response and August action from the FCA to the complainant were not contradictory.

The Commissioner was also asked in the complainant’s request to consider the long period of time taken for the FCA to address the initial call for information and outline the timescale in which it took action against Beaufort when American authorities also raised concerns.

The FCA denied the complainant’s accusation that it waited for authorities in the US  to proceed before launching action against Beaufort in the UK.

Incoming £69m FSCS levy blamed on DB transfers and Sipp claims

Townsend says the FCA should have fully investigated all of the complainant’s claims in March, but only broadly confirmed its knowledge of the situation.

Townsend says: “I have not been able to review the FCA’s confidential files in your case because although it received limited information from other departments, the Complaints Team did not call for the files and has not actively investigated these matters.

“As a result, I have not had access to relevant internal files to assess what action the FCA took in relation to Beaufort and on what timescale.”

Townsend says that the information on Beaufort’s collapse available in the public domain does not excuse the FCA failure to investigate the initial complaint.

He says: “The Complaints Team should have investigated fully the issues raised even if some confidential matters could not be shared with [the complainant]. It was not acceptable for it simply to repeat the information already published.

“I recommend the FCA provide a response about its oversight of and policy approach to the alternative investment market more generally.”

Despite the requirement for most FOIs to be answered within 21 working days, the complainant’ request did not receive any response for more than two months.

The Complaints Team contacted the complainant on 21 May, 13 June and 10 July this year. After taking action against Beaufort in May, the watchdog’s complaint response included apologies for the delay.

FSCS to return ‘vast majority’ of assets after DFM collapse

Townsend says: “There was activity on 22 May (to check with relevant teams that there was no need to defer investigation of your complaint) but no further activity until 8 August, with no apparent explanation for this delay.

“The target date for responding substantively to your complaint was 13 July. This was missed by some margin but still more seriously, the substantive issues you raised were not investigated.”

The complainant will now face further delay while both the FCA and Commissioner investigate the concerns again, the report notes.

In a response, the FCA says: “[We] have accepted the criticisms and recommendations made on this complaint. We have written to the complainant to apologise and offered an ex gratia payment of £100.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. “an ex gratia payment of £100.”?? And that’ll put everything to rights? I hardly think so. In fact, it’s an insult.

    Notable by its absence from this article is any mention of just how soon the FCA plans to release its files, in toto and without redaction, for Mr Townsend to inspect and reach a verdict on just why the FCA failed to act on the information in possession. Or will it, as usual, procrastinate and prevaricate, as it did in response to the demand from Nicky Morgan of the TSC that it must release a full and unredacted version of its report into the near collapse of RBS?

  2. Behaviour which is diametrically opposite of the ‘open manner’ that the regulated are expected to observe.

    • Of course ~ the FCA’s mantra is Do as we say, not as we do. One set of rules and principles for us but quite another for those we purport to regulate. Hence my ongoing calls for the FCA itself to be subject to the unassailable authority of an independent body such as the TSC, which would clearly like to be granted such powers but which, for reasons at which we can only guess, is constantly denied them, presumably by the Treasury.

      That said, the government has recently appointed the Treasury to oversee (euphemistically described as “assist with”) the FCA’s plan of action to address the current crisis in the DPB transfer market. Perhaps this marks a first step towards official oversight of everything the FCA does because, quite clearly, it cannot be trusted to do its job properly without it.

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