Financial Conduct Authority  

FCA criticised for trying to omit names from LCF report

FCA criticised for trying to omit names from LCF report

The Financial Conduct Authority has been heavily cricitised for its attempts to keep the names of three of its directors out of a damning report into its supervision of scandal-embroiled London Capital & Finance. 

Speaking to the Treasury Committee in an evidence session yesterday (February 1) Dame Elizabeth Gloster said she might have been "quite irritated" and "quite surprised" at FCA requests in the form of legal submissions to exclude the names of Andrew Bailey and two other directors from her final investigation. 

Treasury Committee chairman Mel Stride asked the former Court of Appeal judge, who led the investigation into the regulator's role in the scandal, if the FCA was an institute which was trying to "ease the pressure" of the investigation on itself. 

Dame Elizabeth said: "It seemed to me that it was inappropriate in quite a serious way to try and suggest to me as part of the legal...process that their names shouldn't be mentioned.

"Those representations were made in legal submissions by the FCA and the three senior directors I named.

"I was surprised that neither of the three individuals didn't suggest to their lawyers that wouldn't go down very well. It is a lack of judgement to put forward that representation."

She added that her report had not looked at "any allegations of impropriety or lack of integrity", rather a failure of regulation. 

Dame Elizabeth said she took the concept of responsibility "very seriously" and found it appropriate to apportion it to the individuals, namely Mr Bailey, Megan Butler and Jonathan Davidson.   

She said: "The FCA itself requires firms it authorises to have Senior Managers & Certification Regime statements, so that when something goes wrong it is clear who bears responsibility.

"And the FCA in 2016 published a document applying those fundamental principles of the SMCR to itself. That being so...I thought it was indeed appropriate to attribute responsibility, without going into the legal issues." 

Dame Elizabeth's review found the City watchdog had failed to properly regulate the now collapsed company and warned its handling of information from third parties regarding the business was "wholly deficient".

Both the FCA and Mr Bailey issued an apology following the publication of the report at the end of last year. 

In his apology the former chief executive, and now governor of the Bank of England, said the FCA had taken "immediate steps" to change its approach but he was "sorry these did not come in time for LCF bondholders". 

Speaking with MPs yesterday Dame Elizabeth said whilst Mr Bailey was right to say "inherited a difficult situation", the apology did not "really address the problem" and did not provide an "adequate excuse" for the regulator's failures. 

Yesterday's evidence session was the first in the Treasury Committee's investigation into the FCA's oversight of London Capital & Finance, with Mr Bailey expected to appear in front of MPs to face questions next week. 

Off the cuff advice