The Financial Conduct Authority has stood by its latest internal appointment of Megan Butler despite criticism from MPs in relation to the FCA’s supervision of LCF.
Butler (pictured) was appointed executive director for transformation in November and was previously executive director of supervision – investment, wholesale and specialist.
In a Treasury Committee evidence session yesterday (March 1) chairman Mel Stride pointed to failings in the supervision of LCF, in particular the absence of a policy that required the FCA to interrogate a firm about its financial information after receiving allegations of fraud, as highlighted by the LCF review.
Stride said responsibility for the failings rested with the senior management of the supervision division, who he partly identified as Butler.
An independent investigation into the FCA’s handling of the London Capital & Finance mini-bond scandal in December rebuked the regulator for "significant gaps and weaknesses" in its policies and practices.
The independent investigation was requested by the Treasury in 2019 after the mini-bond provider collapsed, owing more than £230m and putting the funds of some 14,000 bondholders at risk.
Responding to Stride’s questioning over Butler’s appointment, Nikhil Rathi, chief executive at the FCA, said he wanted to “get moving quickly” on transformation of the regulator and chose to recruit from within the current executive team.
He added: “Megan was the best candidate for the executive director of transformation role. Recognising the issues that you have identified, I believe she does recognise the mistakes that have been made and is committed to work to resolve them.”
According to Rathi, Butler was one of two internal candidates for the role.
Charles Randell, chairman at the FCA, also stood by her appointment.
He said: “The board was of the view that the mistakes that happened in Megan’s area of responsibility did not amount to serious culpability on her part which would justify us asking her to leave the organisation.”
Randell added: “The one thing we absolutely need in this current period as we transform is some continuity of our knowledge of supervision and experience of that, and that’s why the board agreed with Nikhil that Megan should move into this role.”
Randell also said the board had cancelled performance-related pay for the executive committee from the 2019/20 year after considering the consequences of the scandal.
The Financial Services Compensation Scheme has so far paid £56m in compensation to LCF investors, contributing to a £78m supplementary levy on the industry.
Randell said: “For 2021 there’s been a discussion about performance-related pay, and the executive committee despite having performed, in my view, outstandingly in its response to Covid, considered that in light of the impact of that on the country, it would be wrong for them to be considered for performance-related pay in the current year.
“And finally the board decided that going forward, exco members shouldn’t receive performance-related pay in the future and that it should take this opportunity to reduce both higher pay packages for their exco members and the average levels of exco pay.”