Government and FCA respond on LCF Report

The Treasury Committee has published responses from the Treasury and the FCA to its report on the FCA’s regulation of London Capital & Finance plc (LCF).

Highlights from the government’s response include:

• the government considers that the existing arrangements for examining and, where relevant, amending the regulatory perimeter are effective.
• the government does not consider it necessary to provide the FCA with a formal power to recommend changes to the regulatory perimeter.
• as part of the government’s ongoing work to tackle fraud the Home Office is developing an ambitious Fraud Action Plan, which will be published after the 2021 Spending Review. The plan will consider any potential legislative or regulatory change required to ensure we can effectively tackle fraudulent activity in the round.
• Treasury is aiming to publish its response to the consultation on the regulation of non-transferable debt securities and bring forward plans for legislation in the autumn.
• Treasury is progressing work on the LCF compensation scheme rules, in close collaboration with the FSCS who will administer the scheme. The Treasury is ensuring the government scheme is coordinated with the administration process and the FCA complaints scheme, to the best extent possible.
• the government continues to keep the legislative framework underpinning the regulation of financial promotions under review. This includes arrangements for financial promotions communicated by authorised firms, as well as the effectiveness of the exemptions that form part of the regime. As part of this, the Treasury has already commenced work with the FCA to review exemptions to the financial promotions regime for high net worth individuals, self-certified and certified sophisticated investors.
• the inclusion of fraud in scope of the Online Safety Bill will have a real impact on protecting people from the devastating impact of scams posted on social media and dating sites. The government is also considering tougher regulation of online advertising, including regulations designed to tackle fraud online.

The FCA has also responded to many of the report’s recommendations. Highlights include:

• although the FCA is not within the scope of the SMCR, it has adopted and applied the principles of the regime to its senior managers, as it expects those individuals to meet standards of professional conduct as exacting as those required in regulated firms, and for those individuals to be held accountable for functions they personally direct.
• the FCA Board has set six cultural objectives for the organisation:
  • Being more outcome-driven
  • A more diverse, flexible and inclusive workforce
  • Joint working and collaboration
  • Being more information- and data-led
  • Consistent, end-to-end decision making
  • Accountability and empowerment at all levels of the organisation
• on the “halo effect”, the FCA agrees with the Committee that it is important to do as much as it can to ensure consumers are aware of the risks associated with unregulated activities and are able to make informed judgements. In order to achieve this, the FCA is enhancing its approach to consumer engagement and is taking greater action to tackle consumer harm.
• in terms of protecting consumers from scams, the FCA has worked to notify Google and other online search and social media platforms of unauthorised and misleading or scam adverts in order that they can be taken down, as well as including details of firms or individuals placing those adverts on the FCA warning list. Following this engagement, Google recently announced that from 6 September, firms advertising financial services on its platforms will be required to show that they are authorised by the FCA.