A campaign body has called on MPs to tackle the “ugly truth” of financial scams, with one suggestion being to add a right of action to the City watchdog’s consumer duty.
The Transparency Taskforce presented its recommendations in parliament today (July 14), drawing from a report which already includes endorsements from four MPs.
These include chair of the work and pensions select committee, Stephen Timms, as well as Labour MPs Kim Leadbeater and Andrew Gwynne, and Liberal Democrat MP Sarah Olney.
The report accuses the Financial Conduct Authority’s current regulatory framework of placing “a fig-leaf on malpractice”, encouraging organisations to see fines and regulatory impositions as “merely a cost of doing business”.
The report made three recommendations. One was to introduce a duty of care for consumers by ensuring the harmed party in a financial scam has the right to sue.
That way, the report argued, compensation can be enforced by consumers in the courts, versus waiting on the FCA which it said “can take years”.
Part of this duty of care, it said, would be adding a private right of action to the incoming consumer duty, this would allow individuals to bring civil action against firms for breach of the consumer duty.
The FCA has stopped short of a right to action in its consumer duty, raising concerns that increased compliance costs - such as further increasing the levies firms pay - could lead to firms removing products from the market.
The second recommendation made by the report is for a change in governance of the FCA, asking for less Treasury involvement and more independence.
It pointed to emails from inside the regulator, presented at an employment tribunal hearing last month. They show pressure from the Treasury to promote certain sectors as “innovative”, despite concerns over “detriment to investors”.
The third and final recommendation is to introduce a more formalised and holistic redress scheme for regulatory failure.
The FCA is currently consulting on a consumer redress scheme for individuals who transferred out of the British Steel Pension Scheme, and issuing asset retention requirements for companies who provided the transfer advice.
Lead campaigner Andy Agathangelou said in the report: "This is a clarion call to our elected representatives to fully explore and evaluate the many opportunities to remedy the failings in the financial sector that are available to them, here and now, within the current parliamentary session."
An FCA spokesperson said: "We value any feedback. We have recently set out a new strategy to improve outcomes for consumers and markets across the UK. We have committed to being a more innovative, adaptive and assertive regulator that can fact the threats and opportunities for the future.”