The Financial Conduct Authority has been criticised for its handling of a Cypriot advice firm which had passported into the UK.
Complaints commissioner Antony Townsend said the regulator took too long to take any action after concerns began to emerge.
The ruling follows a complaint about the FCA after a couple was advised by the firm to invest in a product which later went into liquidation, meaning the investment was lost.
The firm was authorised in Cyprus, had been “passported” under European Union rules to operate in the UK, and was only authorised to undertake insurance mediation in the UK, not to provide investment advice.
Mr Townsend's investigation found that from April 2011 there were growing concerns the firm was acting outside its permissions, both in terms of the business that it was doing and because it was not providing cross-border services but had “established” itself in the UK.
In his decision Mr Townsend said: "The FSA/FCA were aware of the potential consumer detriment, and there were extensive interactions with the firm, and then with the Cyprus authorities, to try to resolve the situation.
"My conclusion is that the FSA/FCA made numerous attempts to deal with the problem, but that there appeared to be a reluctance to bring the matter to a head.
"While it is clear that the regulator was properly concerned about potential consumer detriment, the records do not suggest that anyone stood back, established the facts, and considered what the best options were, until the second half of 2013.
"The result was that the situation – and the potential risk – were allowed to continue for too long."
Another issue which arose in the complaint was the FCA's register, with the complainant claiming the restrictions and limitations places on the firm should have been shown.
Mr Townsend said: "While I do not think that it can be said that anything on the FCA’s register is wrong, in this (as in other complaints that I have dealt with) I consider that the FCA’s register has been difficult to navigate, and lacking in readily comprehensible information for consumers.
"It would require considerable work for a consumer, on the basis of the bare information in the register, to understand that an FCA-registered firm was subject to different regulation, and different consumer protection arrangements, because of its EU status."
This is not the first time Mr Townsend has criticised the FCA over its register.
Last year he told the FCA to pay an adviser £6,000 after its register gave the impression their firm was suspended.
In this latest complaint, Mr Townsend came to the conclusion that while the FCA had not handled the issue well, the complainant's financial losses were not caused by these shortcomings.
He said: "While I have great sympathy with the situation in which you find yourself, your initial decision to invest was made only three to four months after the FCA’s significant concerns began to emerge, during which time the FCA was attempting to resolve the issue.
"You made a further investment in 2012, when the FCA’s attempts were continuing. Nonetheless, the fundamental cause of your loss was the firm’s behaviour, not the regulator’s."
Mr Townsend told the FCA to apologise, consider what it can learn from this instance for its relationships with foreign regulators - particularly in light of Brexit, and consider more steps to improve its register.
damian.fantato@ft.com
