The Financial Conduct Authority has been told to pay out after an error on its financial services register contributed to an investor losing £50,000.
In a decision published this week (January 7) the Complaints Commissioner recommended the FCA pay the investor £2,500 for its mistake, which had led the consumer to believe a cloned investment firm was legitimate.
The issue stems from November 2015 when the Austrian regulator of financial services told the FCA that a firm based in Austria — which had permission to operate in the UK under EU ‘passporting’ — wanted to cancel its passport.
Although the UK City-watchdog noted this, a clerical error meant the cancellation was not shown on the Financial Services Register.
At some point after this the firm was cloned by a fraudulent version in the UK, which attracted the interest of the complainant.
When the complainant checked the FCA’s register in September 2015 they were led to believe the firm was authorised to undertake insurance-related activities in the UK.
According to the commissioner, the investor noted the authorisation was not for investments but had relied on the firm’s FCA passporting authorisation and believed it was a legitimate firm, so made the investment.
The FCA upheld the complaint, admitting that had it processed the de-authorisation correctly the register would not have shown the firm as ‘EEA Authorised’ and this in turn could have led to a different investment decision by the consumer.
But the regulator denied any form of responsibility for the losses, arguing the investor should have been alerted by the fact the firm was authorised for insurance-related activities only and pointed to a disclaimer which voided FCA responsibility in regards to the list’s accuracy.
The FCA claimed the register should not in itself be sufficient due diligence for an investment, although it admitted the error was “unhelpful”. It offered £150 for a delay in dealing with the complaint.
However commissioner Antony Townsend ruled the FCA’s clerical error had increased the risk that the cloned firm would remain undetected, ruling that without that mistake “none of this would have happened”.
Mr Townsend also noted the principal responsibility rested with the fraudsters while the investor was "significantly responsible" for their own loss.
He therefore ruled the FCA should pay £2,500 to recognise the set of circumstances in which the investor lost their money.
This was not the first time the watchdog has been forced to compensate consumers over inaccurate entries on the register and the issues have been a hot topic over the past few years.
The watchdog has been accused of "box-ticking" in its management of the list and just six months ago (July 10) admitted it still contained inaccurate data.
The changes to the register due to the implementation of the Senior Managers & Certification Regime are also expected to cause issues, as some advisers were dropped from the register and could be missing from the list for up to a year.
imogen.tew@ft.com
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