The Financial Conduct Authority (FCA) has admitted it has yet to begin reviewing its predecessor's regulation of the failed Connaught fund.
The Treasury select committee grilled the regulator on the upcoming work yesterday (13 June), demanding answers as to when the review, which the regulator had committed to doing two years ago, would be undertaken and completed.
But Andrew Bailey, chief executive of the FCA, said the watchdog was still trying to recover money for investors and that it had been advised "that it potentially jeopardises a case if we conduct a review of a case at the same time as we are conducting an investigation on a legal process".
The regulator agreed to carry out a review into the Financial Services Authority's (FSA) regulation of the Connaught Income Series one fund in December 2016, after the FCA's watchdog, the Complaints Commissioner, found the regulator had "shifted the focus" away from its regulatory failings and onto IFAs.
Adam Nettleship, managing director and Chartered Financial Planner of Surrey-based Bigmore Associates, had made a number of complaints to the commissioner, including "inactivity in the face of fraud".
Mr Nettleship also argued there had been a cover up of regulatory failings by directing the Financial Ombudsman Service to automatically uphold all relevant complaints against IFAs.
The fund, which is now in liquidation, was an unregulated collective investment scheme which Capita ran from March 2008, providing short term bridging finance to commercial operators in the UK property market.
Capita was the operator of the fund until it resigned in September 2009, before the fund went into liquidation in December 2012.
In March 2015 the FCA decided to investigate the activities of Capita and Blue Gate in connection with their roles as operators.
Last November the FCA announced that Capita Financial Managers would pay up to £66m to investors who had suffered a loss as a result of their investment.
This brought an end to its investigation of Capita, but the regulator has said other aspects of its investigation were ongoing.
Mr Bailey told MPs the freeing of funds from Capita was considered an 'achievement' as it had been feared no money was available to hand back to investors at all.
It now wants to recover further funds in two more open cases, Mr Bailey said.
He said: "What we have achieved in the last two years is that we have reached a settlement in a case with Capita, which has resulted in funds being made available to the victims of Connaught. That will cover the principal amount of investments in Connaught.
"We have got one or two remaining cases. We can't tell you whether we will recover any more funds but that is the intention behind it."
When asked whether the regulator had set a date and remit for the review, Mr Bailey again appeared to waver.
But he said the material for the review was gathered together as part of the ongoing investigations so the regulator should be in a good position to get going once the legal cases have been closed.
carmen.reichman@ft.com
