The Complaints Commissioner has said the FCA’s register remains a concern, months after she criticised the regulator in a report on a mini bond scandal.
Giving evidence to the Treasury Committee yesterday (June 15), Amerdeep Somal said although the FCA had taken some steps to mitigate the "halo effect" of the register, her view is that there is still more work to do.
Somal said the register needs to alert investors to the general risk of the halo effect, which is where regulation of certain products can give a potential investor the impression that all products from that company are regulated.
“There needs to be a clear message [on the register] stating that sometimes authorised firms also sell unregulated products and undertake unregulated activities, and that investors should check the register first and ask the firm to confirm in writing whether the product is regulated or not and what that would mean for them,” she said.
The Commissioner added that the FCA should, in her view, go further and require firms to specify in their literature whether the product they are referring to is regulated or not.
“If you have as much information as possible, [displayed] as clearly as possible then you’re protecting all investors.
“It needs to be clear, simple and concise, so all investors can understand.”
FTAdviser understands that the FCA does not agree with the Commissioner that the register is misleading, though agrees that in some ways it could be clearer.
It also accepts the risk of the halo effect, but thinks this is an unavoidable consequence of the legislative framework.
Firms are not required to let the FCA know about unregulated activities they carry out, and therefore these are not included on the register, which the FCA says can create challenges for consumers.
Previous warnings
The FCA has been warned before about its register.
The Complaints Commissioner told the regulator earlier this year its register was misleading, and gave investors in the products the wrong impression, urging the FCA to “seriously consider” amending the warning message on the register to simplify it.
The Commisioner's report was in response to the regulator's handling of the London Capital & Finance scandal, which saw retail investors lose more than £230mn when the firm collapsed in 2019, putting the funds of some 14,000 bondholders at risk.
The scandal was dubbed one of the “largest regulatory failures in decades” at the time.
Register upgrades
Somal said yesterday that the FCA has taken steps to upgrade the register, mentioning the ‘use it or lose it’ powers introduced in May that allow the FCA to swiftly cancel or change what regulated activities firms are permitted to do, specifically when firms are not using their permissions.
The regulated also added a banner on the register in March 2021 to highlight to consumers that regulated firms might carry out unregulated activities.
The FCA is also continuing to make changes to the wording of the risk warnings on the register.
sally.hickey@ft.com
