The Financial Conduct Authority’s Regulation of London Capital & Finance plc

Treasury Committee Closed Inquiry
Opened: 1 Feb 2021 Closed: 20 Jan 2022 Parliament page
22 Recommendations
16 Conclusions
1 Report
6 Letters
5 Events
Activity timeline 8 events
20 Oct
2021
Correspondence
13 Sep
2021
Report published
24 Jun
2021
Report published
24 May
2021
Correspondence
19 May
2021
Correspondence
19 May
2021
Correspondence
28 Apr
2021
Correspondence
9 Feb
2021
Correspondence
Title HC No. Published Items Response
Fourth Report - The Financial Conduct Authority’s Regulation of … HC 149 24 Jun 2021 38 Responded
Recommendations & Conclusions
17 results
Clear
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 … Read more
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, … Read more
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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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 … Read more
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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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 … Read more
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 … Read more
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 … Read more
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 … Read more
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 … Read more
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 … Read more
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 … Read more
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 … Read more
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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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 … Read more
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 … Read more
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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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 … Read more
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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Government Response AI assessment · 38 of 22 classified
Accepted 10
Accepted in Part 1
Acknowledged 9
Deferred 1
Not Addressed 17
Total 22 recs + 16 conclusions
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