The Financial Conduct Authority’s Regulation of London Capital & Finance plc
Treasury Committee
Closed
Inquiry
22
Recommendations
16
Conclusions
1
Report
6
Letters
5
Events
Activity timeline 8 events
20 Oct
2021
2021
13 Sep
2021
2021
24 Jun
2021
2021
24 May
2021
2021
19 May
2021
2021
19 May
2021
2021
28 Apr
2021
2021
Reports 1 report · click to expand
| Title | HC No. | Published | Items | Response |
|---|---|---|---|---|
| Fourth Report - The Financial Conduct Authority’s Regulation of … | HC 149 | 24 Jun 2021 | 38 | Responded |
Recommendations & Conclusions
38 results
1
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
It is not immediately clear that Mr Bailey’s concerns about the distinction between “responsibility” and...
It is not immediately clear that Mr Bailey’s concerns about the distinction between “responsibility” and “culpability” in Dame Elizabeth’s draft report would have “compelled” him to make his “free-standing” objection. However we accept that it is likely that his strong …
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Government Response
The government response describes the FCA's holistic recruitment approach for senior leadership roles, including internal succession planning and global searches, but does not address the committee's conclusion regarding Mr. Bailey's objections or the 'responsibility' versus 'culpability' distinction.
HM Treasury
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2
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
We welcome the FCA’s approach to recruitment for some senior executive roles, which involved global...
We welcome the FCA’s approach to recruitment for some senior executive roles, which involved global searches, but we believe that the FCA was wrong not to have engaged in a fuller recruitment programme for the Executive Director for Transformation role, …
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Government Response
The government response discusses the application of Senior Managers Regime principles to FCA senior managers and its impact on accountability and variable remuneration for control failings, but does not address the committee's specific criticism regarding the recruitment process for the Executive Director for Transformation role.
HM Treasury
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3
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
Given that Dame Elizabeth’s report cited Megan Butler as bearing responsibility for important areas of...
Given that Dame Elizabeth’s report cited Megan Butler as bearing responsibility for important areas of failure and that her recruitment was conducted internally with just one alternative candidate, we understand why many will feel that “a buck that does not …
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Government Response
The government's response explains that while the FCA is not formally under the Senior Managers Regime, it applies its principles to senior managers, resulting in bonus removals for those involved in LCF failings, although not necessarily termination of employment without personal culpability.
HM Treasury
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4
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
We recommend that the default position should be that the FCA take a holistic approach...
We recommend that the default position should be that the FCA take a holistic approach when recruiting for critical roles, rather than engaging in a restricted recruitment process. For time-critical appointments, the FCA should consider appointing on an interim basis …
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Government Response
The government's response provides a general update on the FCA's transformation and business plan, but it does not specifically address the recommended changes to recruitment processes for critical roles or the use of interim appointments.
HM Treasury
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5
Recommendation
Acknowledged
Fourth Report - The Financial Cond…
We accept that a degree of shared responsibility is desirable and necessary in an organisation...
We accept that a degree of shared responsibility is desirable and necessary in an organisation such as the Financial Conduct Authority. However, it is not readily justifiable for the FCA to require the firms that it regulates to adhere to …
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Government Response
The government described internal reviews of Supervision Hub processes and training programmes to ensure they are up-to-date and aligned with the organisation's position on unregulated activities, but did not directly address the recommendation for the FCA Board to reflect on applying Senior Managers Regime principles internally.
HM Treasury
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6
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
We recognise that the demands of some of these senior executive positions at the Financial...
We recognise that the demands of some of these senior executive positions at the Financial Conduct Authority are heavy, and that individual accountability for organisational failings may deter strong candidates from applying for them. But an over-reliance on collective responsibility …
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Government Response
The government response focuses on ensuring consumer awareness of risks in unregulated activities, preventing misleading impressions of regulation, and the 'Use it or Lose it' exercise to remove unused firm permissions, but does not address the committee's concerns regarding senior executive accountability within the FCA.
HM Treasury
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7
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
The FCA plays a vital role as the UK’s financial conduct regulator and prudential regulator...
The FCA plays a vital role as the UK’s financial conduct regulator and prudential regulator for most financial services firms. Its work affects millions of financial services customers and it is important that it has the right culture to facilitate …
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Government Response
The government response outlines its annual perimeter report and engagement with the Treasury on perimeter issues, without addressing the committee's conclusion regarding the FCA's culture and the need for it to be more proactive, agile, and decisive.
HM Treasury
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8
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
We welcome the FCA’s ongoing transformation programme which has cultural change as one of its...
We welcome the FCA’s ongoing transformation programme which has cultural change as one of its priorities. We however note that the FCA has undergone numerous structural and operational changes since its inception, with more changes expected as part of the …
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Government Response
The government's response focuses on the regulatory perimeter and interaction with HM Treasury, providing no specific commitment or discussion regarding the FCA setting an end date, public milestones, or cultural maintenance for its transformation programme.
HM Treasury
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9
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
The FCA accepts that there were failings in the contact centre during the Relevant Period...
The FCA accepts that there were failings in the contact centre during the Relevant Period as identified in Dame Elizabeth’s report, and has begun taking steps to address these. We welcome the operational improvements that have been made since the …
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Government Response
The government response discusses the FCA's resource allocation, regulatory perimeter changes, business plan, and fees consultation, but does not address the committee's conclusion about contact centre failings or welcomed operational improvements.
HM Treasury
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10
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
The FCA should ensure that it keeps its contact centre policies and training up to...
The FCA should ensure that it keeps its contact centre policies and training up to date to ensure clarity and consistency, not just in relation to firms such as LCF but to the wider organisation. (Paragraph 76) The regulatory perimeter …
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Government Response
The government's response discusses the FCA's surveillance work, partnerships with law enforcement, and a forthcoming perimeter report, completely failing to address the recommendation regarding contact centre policies and training.
HM Treasury
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11
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
The case of LCF illustrates how important it is that the FCA looks at a...
The case of LCF illustrates how important it is that the FCA looks at a regulated firm’s activities both within and outside the perimeter of regulation. The FCA’s failure to consider issues raised in LCF’s unregulated bond business led to …
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Government Response
The government's response discusses the complexities of reconfiguring the FCA to prosecute fraud and its limitations in this area, rather than addressing how the FCA will improve its oversight of firms' activities both within and outside the regulatory perimeter to avoid missing red flags.
HM Treasury
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12
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
The “halo effect” appears to be inevitable as long as authorised firms also carry out...
The “halo effect” appears to be inevitable as long as authorised firms also carry out unregulated activities. We reiterate the recommendation made by our predecessors that the FCA should ensure that it requires authorised firms to make clear explicitly the …
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Government Response
The government's response detailed the permanent ban on mass marketing of Speculative Illiquid Securities and ongoing consultations on the Prospectus Regulation, but did not address the recommendation for the FCA to require authorised firms to explicitly state risks associated with their unregulated activities.
HM Treasury
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13
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
In future, the FCA should set out in its annual perimeter report how its supervisory...
In future, the FCA should set out in its annual perimeter report how its supervisory strategies and policies reflect the activities of authorised firms both within and outside the perimeter.
Government Response
The government response discusses improving consumer support and guiding consumers towards better investment decisions through ongoing work, but does not address the recommendation for the FCA to detail its supervisory strategies in its annual perimeter report.
HM Treasury
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14
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
The perimeter is complex, and while the FCA has some limited powers to act beyond...
The perimeter is complex, and while the FCA has some limited powers to act beyond the perimeter, it does not have the remit to actively monitor or intervene outside the perimeter. We recognise the need for the FCA to make …
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Government Response
The government's response focuses entirely on the LCF compensation scheme and complaints, without addressing the conclusion regarding the complexity of the regulatory perimeter or the FCA's limited powers and resources beyond it.
HM Treasury
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15
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
We welcome the ongoing dialogue between the Treasury, the FCA, and other financial regulators on...
We welcome the ongoing dialogue between the Treasury, the FCA, and other financial regulators on the perimeter, but the failings in the FCA’s regulation of LCF and constant movement of the perimeter are signs that further action is required.
Government Response
The government response provides an update on the individual consideration and resolution of LCF complaints, promising a further update to the Committee by 30 September 2021. It does not address the committee's broader points about ongoing dialogue on the perimeter or the need for further action concerning perimeter movement.
HM Treasury
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16
Recommendation
Accepted
Fourth Report - The Financial Cond…
We therefore reiterate a recommendation made by a previous Treasury Committee, that the FCA be...
We therefore reiterate a recommendation made by a previous Treasury Committee, that the FCA be given the formal power and remit to be able to recommend formally to the Treasury changes to the perimeter of regulation, where that would enhance …
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Government Response
The government details the FCA's existing powers and actions to tackle non-compliant financial promotions and prevent consumer harm, but it does not address the specific recommendation to give the FCA formal power to recommend changes to the perimeter of regulation.
HM Treasury
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17
Conclusion
Not Addressed
Fourth Report - The Financial Cond…
Both the FCA and the Treasury accept that the scope of the FCA’s remit is...
Both the FCA and the Treasury accept that the scope of the FCA’s remit is broad and continues to increase. The breadth of the scope has had some operational impacts on the FCA’s ability to carry out its work. We …
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Government Response
The government response discusses concerns about Financial Promotion Order exemptions for high-net-worth and sophisticated investors, highlighting them as a vulnerability requiring legislative changes. It does not address the committee's conclusion regarding the FCA's broad remit or the timescales for its transformation programme.
HM Treasury
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18
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
If the FCA Board were to set itself an end date for the transformation programme,...
If the FCA Board were to set itself an end date for the transformation programme, as we recommend in Chapter 2, the Treasury would have a clear indication of when to begin its consideration of the scope of the FCA’s remit.
Government Response
The government's response discusses online financial scams and Google's recent policy changes, and the need for legislation, completely failing to address the recommendation regarding the Treasury's consideration of the FCA's remit linked to the FCA's transformation programme.
HM Treasury
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19
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
Any changes to the perimeter must be matched with appropriate changes in the FCA’s resources,...
Any changes to the perimeter must be matched with appropriate changes in the FCA’s resources, and the FCA should republish its priorities. The Treasury should publish a policy statement on how it will analyse changes to the FCA’s perimeter and …
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Government Response
The government's response focuses on ongoing work with online platforms to combat financial scams and the Online Safety Bill, rather than addressing the committee's specific recommendation regarding FCA resources and the Treasury's perimeter policy statement.
HM Treasury
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20
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
The FCA recognises that it has a statutory duty to protect customers from fraud.
The FCA recognises that it has a statutory duty to protect customers from fraud. In the case of LCF, the regulator fell short, due to a culture that saw fraud as principally a matter for the police, and its lack …
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Government Response
The government welcomes the report, repeats its apology for LCF failures, and states it has accepted and is implementing Dame Elizabeth Gloster's recommendations, including staff training and strengthening processes, with an update already published to the Committee.
HM Treasury
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21
Recommendation
Accepted
Fourth Report - The Financial Cond…
The FCA should develop a strategy for how it will approach fraud risks that are...
The FCA should develop a strategy for how it will approach fraud risks that are outside the perimeter of regulation but involve authorised firms. That strategy should be set out in the next perimeter report.
Government Response
The government commits to developing a strategy for tackling fraud risks outside the regulatory perimeter but involving authorised firms, improving partnerships, and publishing details of this work in the next perimeter report.
HM Treasury
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22
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
The FCA’s work to prevent fraud is done in partnership with other bodies such as...
The FCA’s work to prevent fraud is done in partnership with other bodies such as the National Crime Agency and Serious Fraud Office. But the police have limited resources and personnel devoted to tackling fraud, and the FCA currently does …
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Government Response
The government acknowledges the seriousness of fraud and is developing an ambitious Fraud Action Plan through the Home Office, which will consider potential legislative or regulatory changes after the 2021 Spending Review.
HM Treasury
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23
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
There may be scope for the Government to consider whether the FCA should be given...
There may be scope for the Government to consider whether the FCA should be given more powers to enable it to investigate fraud and financial crime. We will continue to consider this as part of our Economic Crime inquiry.
Government Response
The government states its serious commitment to tackling fraud through cross-government work and the Home Office's upcoming Fraud Action Plan, which will consider potential legislative or regulatory changes.
HM Treasury
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24
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
The unusual way in which LCF used mini-bonds and the high level of risk associated...
The unusual way in which LCF used mini-bonds and the high level of risk associated with any such investments highlight the need for the Treasury’s intervention. We welcome the Treasury’s ongoing consultation on the regulation of non-transferable debt securities but …
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Government Response
The Treasury confirmed that its consultation on non-transferable debt securities (NTDS) has closed and it aims to publish its response and introduce legislation in the autumn.
HM Treasury
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25
Recommendation
Deferred
Fourth Report - The Financial Cond…
In light of the recent failings of several mini-bond issuers and the nature of the...
In light of the recent failings of several mini-bond issuers and the nature of the existing regulatory arrangements, the Treasury should proceed with its analysis as soon as the consultation on the regulation of non-transferable debt securities closes, and it …
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Government Response
The Treasury aims to publish its response to the consultation on non-transferable debt securities and bring forward plans for legislation in the autumn, following the consultation's closure in July 2021.
HM Treasury
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26
Recommendation
Acknowledged
Fourth Report - The Financial Cond…
The FCA should consider how it can improve its customer information so as to help...
The FCA should consider how it can improve its customer information so as to help equip customers with the ability to deal with the important financial decisions that they will have to take, and the risks that are attached to those decisions.
Government Response
The government acknowledges the need to improve consumer support for financial decisions, stating it is engaged in ongoing work with stakeholders to address regulatory barriers and develop varied services, including engagement with MaPS.
HM Treasury
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27
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
The collapse of LCF brought about a huge degree of uncertainty for bondholders, some of...
The collapse of LCF brought about a huge degree of uncertainty for bondholders, some of whom were faced with an anxious wait for the publication of Dame Elizabeth’s report and further details of the Government’s compensation scheme. We welcome the …
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Government Response
The government acknowledged the Committee's support for the LCF compensation scheme, detailing that the Treasury is progressing work with the FSCS, who aims to pay eligible bondholders within 6 months of Royal Assent.
HM Treasury
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28
Recommendation
Accepted
Fourth Report - The Financial Cond…
The Government has taken a positive step by introducing the primary legislation necessary to establish...
The Government has taken a positive step by introducing the primary legislation necessary to establish the LCF compensation scheme. If the Bill has a successful passage through Parliament, the Treasury should ensure a smooth running of the compensation scheme, without …
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Government Response
The Treasury is progressing work on LCF compensation scheme rules with the FSCS, which is committed to ensuring payments to eligible bondholders within six months of the Bill's Royal Assent.
HM Treasury
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29
Recommendation
Accepted in Part
Fourth Report - The Financial Cond…
We note that there are other ongoing discussions and channels by which LCF bondholders can...
We note that there are other ongoing discussions and channels by which LCF bondholders can seek compensation, such as through the FCA complaints scheme 52 The Financial Conduct Authority’s Regulation of London Capital & Finance plc and through LCF administrators. …
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Government Response
The Treasury is ensuring the LCF compensation scheme is coordinated with the administration process and the FCA complaints scheme. While acknowledging issues with the FCA's complaints handling, the government notes the FCA's improvement plans and commits to monitoring their delivery, stating the scheme's design is a matter for independent regulators.
HM Treasury
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30
Recommendation
Accepted
Fourth Report - The Financial Cond…
The FCA should provide us with an update on its resolution of LCF complaints by...
The FCA should provide us with an update on its resolution of LCF complaints by 30 September 2021. (Paragraph 160) Financial promotions
Government Response
The government commits to providing an update to the Committee on the FCA’s resolution of LCF complaints by 30 September 2021, noting that 98% of complainants had already received a response by 23 August 2021.
HM Treasury
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31
Recommendation
Accepted
Fourth Report - The Financial Cond…
We welcome the Treasury’s ongoing consultation on approving financial promotions.
We welcome the Treasury’s ongoing consultation on approving financial promotions. We trust that the results of the consultation will be published swiftly and the conclusions implemented as soon as possible.
Government Response
The government confirmed it published the response to its consultation on 22 June 2021 and intends to bring forward legislation to establish a regulatory gateway for financial promotion approval when parliamentary time allows.
HM Treasury
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32
Recommendation
Accepted
Fourth Report - The Financial Cond…
We welcome the steps taken by the FCA to change its approach to financial promotions,...
We welcome the steps taken by the FCA to change its approach to financial promotions, as well as introducing the “use it or lose it” programme. In future, the FCA should be more interventionist and should make more frequent use …
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Government Response
The government detailed extensive ongoing efforts and specific measures taken since 2019, including establishing a Joint Supervision and Enforcement Team, using formal powers more assertively, and developing a new data-led strategy for financial promotions, to be more interventionist and proactively disrupt harm.
HM Treasury
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33
Recommendation
Accepted
Fourth Report - The Financial Cond…
The Financial Promotion Order would benefit from reform due to the increasing risks associated with...
The Financial Promotion Order would benefit from reform due to the increasing risks associated with the exemptions that allow customers to self-certify as high net worth or sophisticated.
Government Response
The government stated it keeps the legislative framework for financial promotions under review, has commenced work with the FCA to review exemptions for high net worth and sophisticated investors, and intends to bring forward legislation to establish a regulatory gateway for promotion approval.
HM Treasury
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34
Recommendation
Accepted
Fourth Report - The Financial Cond…
The Treasury should—as a matter of priority—re-evaluate the Financial Promotion Order exemptions to determine their...
The Treasury should—as a matter of priority—re-evaluate the Financial Promotion Order exemptions to determine their appropriateness and consider what changes need to be made to protect consumers.
Government Response
The government states it is already reviewing Financial Promotion Order exemptions, specifically for high net worth and sophisticated investors, and plans to bring forward legislation to establish a regulatory gateway for approving financial promotions when parliamentary time allows.
HM Treasury
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35
Recommendation
Accepted
Fourth Report - The Financial Cond…
It is very disappointing to see that despite the numerous representations made to the Government,...
It is very disappointing to see that despite the numerous representations made to the Government, measures to address fraud via online advertising have not been included in the draft Online Safety Bill. This is a missed opportunity to act and …
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Government Response
The government confirms that fraud will be included in the scope of the Online Safety Bill, directly addressing the committee's concern. It also outlines further actions including a DCMS consultation on online advertising, FCA investigations into platforms' compliance, and an upcoming Home Office Fraud Action Plan.
HM Treasury
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36
Conclusion
Acknowledged
Fourth Report - The Financial Cond…
We note the Government’s intention to consider additional legislative and non- legislative solutions to tackle...
We note the Government’s intention to consider additional legislative and non- legislative solutions to tackle fraud via advertising, emails or cloned websites, including the online advertising programme, but we believe quicker action is required to protect consumers and help the …
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Government Response
The government response details multiple initiatives to tackle online fraud, including the inclusion of fraud in the Online Safety Bill, upcoming DCMS consultation on online advertising, FCA action on financial promotions, and the Home Office developing a Fraud Action Plan to be published after the 2021 Spending Review.
HM Treasury
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37
Recommendation
Accepted
Fourth Report - The Financial Cond…
We recommend that the Government should include measures to address fraud via online advertising in...
We recommend that the Government should include measures to address fraud via online advertising in the Online Safety Bill, in the interests of preventing further harm to customers being offered fraudulent financial products.
Government Response
The government confirms that fraud will be included within the scope of the Online Safety Bill to protect against scams on social media and dating sites. It also highlights further considerations for tougher online advertising regulation and ongoing work to combat fraud.
HM Treasury
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38
Recommendation
Not Addressed
Fourth Report - The Financial Cond…
Pending any legislative changes, the FCA should continue to work with online platforms such as...
Pending any legislative changes, the FCA should continue to work with online platforms such as Google to remove misleading and fraudulent adverts as quickly as possible, to protect customers from scams. (Paragraph 193) The Financial Conduct Authority’s Regulation of London …
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Government Response
The government's response focuses on the inclusion of fraud in the Online Safety Bill, upcoming consultations on online advertising, and a wider Fraud Action Plan, but does not explicitly state that the FCA will continue working with platforms to remove misleading adverts quickly.
HM Treasury
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Correspondence 6 letters
20 Oct 2021
From committee
Letter to the Chair from the Chief Executive of the FCA, regarding the TSC report on LCF, dated 30 September 2021
Parliament page
24 May 2021
From committee
Letter to the Chair from the FCA Chief Executive relating to independent reviews
Parliament page
19 May 2021
To committee
Letter from the Chair to the Economic Secretary to the Treasury, relating to London Capital & Finance
Parliament page
19 May 2021
To committee
Letter from the Economic Secretary to the Chair relating to London Capital & Finance
Parliament page
28 Apr 2021
To committee
letter from the Economic Secretary to the Chair, relating to the session the Committee held on Wednesday 21 April
Parliament page
9 Feb 2021
From committee
Letter to Chair from Rt Hon Dame Elizabeth Gloster regarding independent investigation into FCA's regulation of London Capital and Finance plc, dated 8 February 2021
Parliament page