Bondholders in collapsed investment firm London Capital & Finance are calling for the investigation into the City watchdog’s actions in the scandal to be overhauled for fear of an “institutional cover-up”.
The Financial Conduct Authority was asked by the Treasury to set up an independent investigation into itself after the Evening Standard revealed it had been warned about LCF as early as 2015 and again in 2017.
Despite the warnings, the FCA gave LCF regulated status in 2016, and only moved to stop the firm marketing to the public in December last year, by which time 11,700 people had parted with £237 million.
The committee of creditors, selected by bondholders to represent them in attempts to recoup their money, has written to the FCA’s superiors at the Treasury to demand the inquiry be wider in scope.
“We have some serious concerns that the FCA investigation may become an institutional cover-up and that the FCA may place its reputation above its obligations around consumer protection and market integrity,” the letter says.
They are concerned the probe will only look at the FCA’s regulation of the specific type of products sold by LCF.
The letter asks that, rather than being conducted under Section 77 of the Financial Services Act (covering issues of “public interest”), the probe be done under the more sweeping Section 73, (“serious regulatory failure”).
Asked about the concerns, the Treasury referred to City minister John Glen’s previous comments that Section 77 was appropriate.
