Financial Conduct Authority  

FCA wins 'fraud' bond investigation complaint

FCA wins 'fraud' bond investigation complaint

The Financial Conduct Authority has been cleared of failing to investigate an unregulated company after a disgruntled investor took their case to the Financial Regulators Complaints Commissioner.

In a decision published this week Complaints Commissioner Antony Townsend said the FCA had acted properly and given "very good advice" to the complainant at their point of contact in 2017.

The investor, who lost £5,000 from his investment in the bond, had initially filed a complaint with the FCA, demanding reimbursement for losses, which it did not uphold.

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The investor then turned to the FRCC. The complaint revolved around a call made to the FCA in May 2017.

The complainant had signed a contract to purchase a £5,000 bond through a company that was unregulated by the FCA.

The complainant, whose name was not revealed in the FRCC’s report, then called the watchdog to ask whether there would be a cooling off period if they were to change their mind. 

According to the FRCC report, the FCA’s Consumer Contact Centre (CCC) advised the investor as the company was not regulated, there was no specific conditions to which it could be held.

The CCC also warned the investor about scams and advised them to contact the Citizens Advice Bureau or seek legal advice before purchasing the bond.

Mr Townsend said it had been clear throughout the call to the CCC, which had been recorded, that its representative made the investor aware of its lack of jurisdiction over unregulated firms and that they should seek further guidance before committing capital. 

He said: "I consider the FCA member of staff gave you sufficient information and guidance to enable you to understand that company C and the bond they were trying to sell you were not regulated; to explain what your options were with respect to the purchase and what to do if you did not wish to go through with the purchase; and to warn you that cold callers asking you to invest over the phone might be fraudsters."

Mr Townsend said it appeared to him that the investor did not seek further advice and instead invested the money, which was subsequently lost. 

The investor’s complaint sought the reimbursement from the FCA of the whole £5,000, claiming their call was not put through to a department that could have identified money laundering or fraud. 

The commissioner said that during its investigation, the FCA complaints team identified that the information given on the phone call should have been passed on to the Unauthorised Business Department and said it would learn lessons from the event.

However, Mr Townsend said this had had "no effect upon the advice which you were given, nor would it have affected your financial position".

This is because the unit handles information about unauthorised activities so regulatory action can be taken, but it does not settle individual complaints.

Finally, Mr Townsend suggested the complainant consider very carefully whether to seek further action against the regulator, which would be at their own expense.