Britain’s monetary watchdog has been accused of unlawfully altering its complaints scheme “by way of the backdoor” in an try and keep away from paying compensation to victims of failed funds or funding scams.
The Monetary Conduct Authority (FCA) is presupposed to have modified its complaints scheme simply because it was dealing with lots of of claims from savers who had misplaced greater than £200m within the collapse of the funding agency London Capital & Finance (LCF) in 2019. It denies performing unlawfully and insists it was “clarifying” the scheme’s tips. The watchdog is now being investigated by the Monetary Regulators Complaints’ Commissioner over the controversy.
The FCA is below hearth after a string of scandals on its watch, together with the closure of Neil Woodford’s £3.1bn Woodford Equity Income Fund which shut down in October 2019 with heavy losses for tens of 1000’s of buyers. Below the present guidelines, the victims of monetary scandals can declare ex-gratia compensation payouts from the FCA the place it has did not safeguard shoppers.
The regulator printed tips in June final yr which stated shoppers would solely be entitled to payouts when the regulator was “solely or primarily” liable for their losses.
Andrea Corridor, a member of the LCF bondholders marketing campaign group, stated: “They thought they’d simply change the foundations and nobody would problem them. We needed them to carry their palms up and pay compensation as a result of they haven’t been punished.”
“They needed to close that door on this wall of complaints on their regulatory failures. It’s sheer conceitedness.”
Greater than 1,000 victims of the LCF scandal have complained to the FCA. Most have been refused compensation for its admitted regulatory failings, however have been provided settlements of between £50 and £125 due to the delays in coping with their complaints.
Amerdeep Somal, the Monetary Regulators Complaints’ Commissioner, is now investigating the refusals. A confidential draft report of her preliminary findings seen by the Observer says the watchdog tried to make adjustments to its complaints scheme “by way of the backdoor” which appeared “opposite” to its statutory function.
“The underhand method through which the FCA set about altering their compensation scheme is completely shameful,” stated Gina Miller from the True and Fair Campaign, which campaigns for higher monetary regulation. She stated the rules have been “illegal” and “needs to be instantly eliminated.”
Amanda Cunningham, 53, who lives close to Colne, Lancashire, invested £22,000 to assist construct a financial savings pot for her son Jack, 22, who’s autistic, however the cash was worn out by the collapse of LCF. She stated: “[The FCA] have been there to guard folks they usually failed. They have been asleep on the wheel. We wish to know that classes have been discovered and that the general public will likely be safeguarded.”
A report printed by the previous court docket of attraction choose, Dame Elizabeth Gloster, final December confirmed a listing of failures by the watchdog over the collapse of LCF, which provided mounted curiosity on unregulated bonds. The Severe Fraud Workplace is now investigating the collapse.
The Gloster report discovered the FCA failed to reply to repeated warnings of potential fraud at LCF due to a scarcity of clear insurance policies on how employees move on allegations of fraud or severe irregularities within the gross sales of unregulated merchandise. These included a number of written warnings and calls, together with one name from a member of the general public on 15 July 2016 which warned LCF was working a “pyramid rip-off”.
The watchdog’s chairman, Charles Randell, introduced his resignation final month, a yr sooner than deliberate. He stated it was the fitting time for a brand new chair to finish a change of the regulator. The Observer revealed final month that the watchdog has paid out bonuses of more than £125m to its employees since 2016.
HM Treasury announced a £120m scheme in April to pay compensation to LCF bondholders. Some buyers have been additionally capable of make claims below the Monetary Companies Compensation Scheme. The buyers took separate motion towards the FCA as a result of they need it to just accept legal responsibility and pay compensation for its failures.
The Monetary Regulators Complaints Commissioner’s workplace stated the investigation into LCF complaints was ongoing and the commissioner could be contemplating responses to the preliminary report.
An FCA spokesperson stated: “The assertion we issued in June 2020 didn’t introduce any new check however as a substitute set out our longstanding strategy to providing funds in recognition of monetary loss. There was no change to the substance of the check and LCF complaints are being thought-about below the prevailing scheme.
“It has already been agreed that buyers who’ve skilled losses because of the collapse of LCF are capable of obtain compensation from both the federal government compensation scheme or the Monetary Companies Compensation Scheme.”