FIN.

FCA responds to Treasury Committee on LCF

Andrew Bailey has responded to the Treasury Committee on aspects of its supervision in respect of the LCF investigation. Key elements of the response looked at:

  • the need for the report to separate accountability with personal culpability.  Andrew Bailey had felt the original report had not made it clear whether Dame Elizabeth Gloster considered individuals at FCA personally culpable and was grateful that the final report had confirmed that she did not believe this to be the case;
  • the concept of the “broken machine” that Mr Bailey and others had inherited, in terms of the way FCA supervises flexible portfolio firms; and
  • key lessons learned. Mr Bailey summarised these as:
    • the need to rigorously prioritise resources;
    • as a result of this, how best to define “vulnerability” – given FCA had during the period mainly focussed on HCCST;
    • FCA did take action during the period – culminating the new rules for SIS, but he noted that most mini-bonds would previously have been considered NRRS since FCA introduced rules to limit their marketing in 2014;
    • financial promotion: and the scope for fraud and misconduct in online advertising in particular;
    • FCA’s need to prioritise taking actions relating to matters inside the perimeter, when serious issues were also occurring outside it; and
    • because approving financial promotions is not a regulated activity, any firm can approve them and therefore FCA’s task of regulating promotions is necessarily reactive and not as robust as its regulation of regulated activities.

Emma Radmore