FCA to pay out on LCF complaints but not Connaught

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FCA to pay out on LCF complaints but not Connaught

In an announcement today (April 19) the Financial Conduct Authority set out how it will assess the complaints it has received about both LCF and Connaught.

While LCF complainants are expected to be compensated financially, Connaught complainants will receive only an apology.

It follows a report by Dame Elizabeth Gloster published in December which warned the FCA had shown "significant gaps and weaknesses" in its policies and practices ahead of LCF's collapse.

The investigation also found the regulator could have done more to protect investors in LCF and its handling of information from third parties regarding the business was "wholly deficient".

The FCA said it is “very sorry for the errors we made in our handling of this case” and said it was committed to implementing each of the recommendations Dame Gloster made in her review.

The regulator said it has conducted an initial review of LCF investors’ direct communications with the FCA over the period between April 1, 2014 and December 10, 2018, the date of the FCA’s first regulatory intervention.

It has identified investors who were given incorrect information in these communications which may have led them to conclude their investment would be safer than it was. 

The FCA stated: “While we do not believe this was the primary cause of these investors’ losses, those direct communications may have been a factor in their decision to invest, or to remain invested. 

“While each case will be given individual consideration, given the exceptional circumstances the FCA intends to offer ex gratia payments to the small number of investors who fall into this category who have not already been compensated by the FSCS.”

The City watchdog will contact these investors directly to discuss the details of the payments and how they will interact with the government's new compensation scheme and any payments made by the FSCS. 

The FCA said it will aim to provide a response to complainants by the end of June.

Meanwhile, the FCA has decided that it will not offer payments to complainants of its handling of Connaught but will instead issue an apology.

Led by Raj Parker, the Connaught investigation also found the City watchdog's regulation of the fund was "not appropriate or effective" and it could have done more to protect consumers. 

The FCA said the majority of complaints received from investors concerning the FCA and FSA’s actions in its handling of the collapse of the fund were investigated, determined with decision letters and closed in 2017. 

It stated: “In regard to these complaints received by the FCA, we committed to reconsidering the issue of remedies once the independent review was published. 

“We have now reconsidered these complaints taking account of our approach to remedies, the relevant factors in the complaints scheme and the statutory framework within which we operate. We consider that an apology is the most appropriate remedy in the circumstances.”

It will contact complainants directly to provide its apology.

amy.austin@ft.com

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