Nothing could have prepared us for the news that our treasured colleague Ian Davis had taken his own life after falling victim to a financial scam.
Ian had lost £600,000 in the mini-bond scandal of London Capital & Finance, which collapsed in 2019 owing more than £230mn to investors.
Ian was a very popular Transparency Task Force volunteer and he was also one of the 170-plus respondents that had engaged with the all-party parliamentary group on personal banking and fairer financial services in relation to its call for evidence about the Financial Conduct Authority's supervision of LCF.
Ian’s submission to the APPG shows how terribly frustrated he had become trying to properly engage with the authorities.
I attended Ian’s funeral, and with his family we subsequently organised an early day motion to mark his passing and put his frustrations on the record.
It’s too late to do anything to help Ian, but like most people I’m convinced there’s more that could and should be done to properly fight back against the scammers, and as is often the case it makes most sense to ‘nip things in the bud’ – ie for scams to be closed down as soon as possible – before they really take hold and cause wide-scale carnage.
There’s a particular idea that we’re enthusiastic about – it’s precisely about closing down new scams early.
We don’t know why the FCA doesn't seem keen to trial the idea. Maybe the problem is cost.The idea is the brainchild of TTF’s head of strategy, Mark Bishop, who says to make the FCA’s ScamSmart campaign more effective the FCA should change its ads by asking people who believe they've been approached to invest in a financial scam to directly tip off the regulator, instead of visiting its website to learn about financial scams.
We believe this approach would have three advantages:
- Prospective scammers would see the ads and realise that every potential victim could now notify the FCA, raising the risk of detection and thus acting as a deterrent.
- The FCA would be notified of more rip-off schemes, and far sooner after commencement, giving it more opportunity to act before widespread consumer detriment has occurred.
- An evidence trail would be created of citizens alerting the FCA, which, if no action resulted, could help victims make the case for compensation from the regulator.
That last point is especially poignant for advisers, because it has been well-documented that many IFAs have alerted the FCA to scams, even in relation to LCF, with Neil Liversidge of West Riding Personal Financial Solutions warning the regulator in November 2015 of LCF’s alleged marketing to unsophisticated retail investors and its lending practices, according to a report in the Evening Standard.
Overall, there’s a good chance that this small adjustment could boost the effectiveness of the FCA’s work in this space.
But despite its obvious merits, the FCA has so far not acted on Bishop's idea.
There’s good reason for Bishop to be interested in preventing scams and further investment scandals; Bishop is a victim of investment failure himself having invested in Connaught Income Series 1, a series of unregulated investments that collapsed, and later becoming a leader of the Connaught Action Group.
Connaught is yet another example of a scandal that perhaps could have been stopped early had the regulator acted on credible intelligence: Raj Parker’s December 2020 independent review into the regulator's handling of the Connaught fund found that it received alerts from at least three whistleblowers, one very senior one, but failed to respond adequately.
There’s more that could and should be done to properly fight back against the scammers.We don’t know why the FCA doesn't seem keen to trial the idea. Maybe the problem is cost. But we are not sure this actually computes when the cost for trialling a line of revised copy in some ads should be close to zero and would, we believe, generate a very healthy return on investment if avoiding yet another big regulatory failure.
We could speculate that the real reason for not trialling the idea is that the FCA doesn’t want to create evidence trails over concerns these could help victims make the case for compensation more easily.
TTF would like to partner with IFAs to raise awareness of the idea, in the hope that our collective endeavour might result in a change of mind at the FCA, which might ultimately help avoid unnecessary consumer detriment, including tragedies, and a reduction in the Financial Services Compensation Scheme levy.
Andy Agathangelou is founder of the Transparency Task Force
FCA response:
In response to Agathangelou's comments about the FCA's failings in relation to LCF and Connaught, the FCA said: "We know that the collapse of LCF had a devastating effect on many consumers.
"There are a number of things we could have done better in our supervision of both LCF and Connaught, which is why we accepted the recommendations made to us by the independent reviewers and have acted to transform the FCA."
In response to his comments about the FCA's apparent unwillingness to adapt ScamSmart, the regulator said it was keeping an open mind: "Our ScamSmart campaign focuses on two areas to stop scams: raising consumer awareness of the key warning signs and driving use of our warning list tool.
"Over 2mn people have visited our ScamSmart website since 2014, and more than 30,000 have seen our warnings about specific unauthorised firms. Our research indicates at-risk consumers are now more likely to consider the risk of scams when investing, are more likely to be aware of the warning signs, and more likely to check with us before investing.
"While not a core objective, the campaign has also led to increased levels of reporting and better intelligence for our teams.
"We have not rejected the idea suggested by the TTF, but have said that we will consider it as part of a wider strategic review of the ScamSmart campaign."
