|The Financial Conduct Authority (FCA) is ‘profoundy sorry’ for
mistakes in the handling of recent scandals that had a ‘devastating’
impact on investors who lost millions of pounds..
Addressing a virtual conference organised by trade association Pimfa, the FCA’s head of life insurance and advice Debbie Gupta said the regulator needed to change, and described recent reports into its handling of the London Capital & Finance and Connaught scandals as ‘sobering reading’.
Investors lost around £236 million after mini-bond investment firm LCF collapsed into administration in 2019 and £104m from the Connaught Income fund blowing up in 2012.
The two landmark reviews, released simultaneously late last year, had left the agency with little choice but to accept the need for major reforms.
‘I wanted to reassure you that we are profoundly sorry for the mistakes we made and the devastating impact that has had on investors,’ she said.
‘Our approach to the consumer investment market will need to change and we will need to take account of the learnings from both the reviews.’
Gupta went on to describe the Financial Services Compensation Scheme (FSCS) levy as ‘unsustainable’ but said some industry proposals were ‘inherently contradictory’.
She said: ‘Recognising that there was room for improvement was not the same as being the cause of higher FSCS or Professional Indemnity Insurance premiums.’
At the beginning of the year, the regulator had forecast the levy will rocket by 48% to over £1bn this year as it anticipates a rise in the number of firms collapsing due to the impact of Covid.
That followed back-to-back double-digit increases in the share of the bill falling on the investment industry, following a series of major business failures.
The levy hike has been so significant that hit profits at a number of wealth firms, including wealth giant St James’s Place and Charles Stanley, causing uproar in the industry,
A survey conducted by Pimfa found almost two-thirds of owners and CEOs of financial planning and wealth management business did not trust the FSCS to deliver fair outcomes for either consumers or the industry.
Pimfa chief executive Liz Field said: ‘We will continue to the engage with both the FCA and the FSCS to the issues of the levy and supervision. The fact that they both acknowledge the levy is unsustainable and that improvements need to be made to supervision are both welcome.’
As part of its overhaul, the FCA shook up its executive team last month making a series of hires to ensure the agency is ‘able to make fast and effective decisions’.
The regulator has also come under renewed pressure over the announcement of failed fund manager Neil Woodfrod’s controversial comeback, which infuriated the industry last month.
Campaigners and politicians are now calling on the FCA to conclude its ongoing investigation into the implosion of Woodford’s investment empire which collapsed in 2019 trapping £3.9bn of investor cash.
BaddersMar 10, 2021, 15:45
There speaks a regulator that created a totally unnecessary £55m (yes, fifty five million pounds) bill for the FSCS by its cack handed handling of the shutting down of Beaufort Securities.