Fourth Report - The Financial Conduct Authority’s Regulation of London Capital & Finance plc
Select Committee
Treasury Committee
HC 149
24 June 2021
Government response
Second Special Report: The Financial Conduct Authority's Regulation of London Capital & Finance plc: responses to the Committee's Fourth Report of Session 2021-22 · published 13 Sep 2021
Recommendations & Conclusions
9 results
3
Conclusion
Acknowledged
Para 42
Given that Dame Elizabeth’s report cited Megan Butler as bearing responsibility for important areas of...
Conclusion
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 Summary
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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5
Recommendation
Acknowledged
Para 48
We accept that a degree of shared responsibility is desirable and necessary in an organisation...
Recommendation
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 Summary
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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20
Conclusion
Acknowledged
The FCA recognises that it has a statutory duty to protect customers from fraud.
Conclusion
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 Summary
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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22
Conclusion
Acknowledged
Para 124
The FCA’s work to prevent fraud is done in partnership with other bodies such as...
Conclusion
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 Summary
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
Para 125
There may be scope for the Government to consider whether the FCA should be given...
Conclusion
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 Summary
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
Para 138
The unusual way in which LCF used mini-bonds and the high level of risk associated...
Conclusion
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 Summary
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.
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26
Recommendation
Acknowledged
Para 145
The FCA should consider how it can improve its customer information so as to help...
Recommendation
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 Summary
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
Para 157
The collapse of LCF brought about a huge degree of uncertainty for bondholders, some of...
Conclusion
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 Summary
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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36
Conclusion
Acknowledged
Para 191
We note the Government’s intention to consider additional legislative and non- legislative solutions to tackle...
Conclusion
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 Summary
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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