Complaints commissioner dismisses investor complaints over LCF
Investors’ complaints regarding the handling of the London Capital & Finance (LCF) scandal by the Financial Conduct Authority (FCA) have not been upheld by the Financial Regulators Complaints Commissioner (FRCC), according to a report published earlier this month.
The FRCC issued its second report into the City regulator’s handling of the LCF scandal, responding to several complaints raised by investors against the FCA.
According to the report, investors objected to the FCA’s use of the term mini-bond, claiming that it affected public perception of investors due to the way the FCA has ‘loaded’ the term. They also claimed that the FCA has repeatedly taken positions which are opposed to the interests of LCF bondholders.
Another allegation was the fact that FCA failed as an unfair terms regulator, by not highlighting that the non-transfer clauses in LCF’s documentation were unenforceable.
In total, investors referred five complaints to the FRCC after they were investigated by the FCA and were not upheld.
The FRCC criticised the FCA on a number of points, agreeing that the regulator failed to scrutinise the unusual LCF business model appropriately.
However, complaints commissioner Amerdeep Somal wrote that it is not necessary to “pursue this limb of enquiry” as it was already dealt with in the Gloster report, an independent investigation conducted by Dame Elizabeth Gloster and published in 2020.
Read more: London Capital & Finance compensation scheme comes to a close
The FRCC also criticised the FCA for how it presented information relating to mini-bonds on its website, having made changes after claiming that it did not think it lacked clarity.
“It is disappointing that the FCA has taken the defensive position it has given the evidence and my criticism remains unchanged,” Somal wrote.
Despite the criticism, the FRCC did not uphold the complaints as it found the FCA’s actions were not unreasonable.
Somal did note however that she is mindful of the findings of the Gloster report, which found that “the FCA did not discharge its functions in respect of LCF in a manner which enabled it effectively to fulfil its statutory objectives”.
Read more: Investors forced to wait for answers until FCA finishes investigations
LCF fell into administration on 30 January 2019. Its compensation scheme came to a close on 31 October, the Treasury has confirmed, having paid out £115m to investors in the failed mini-bond provider.
The scheme, administered by the Financial Services Compensation Scheme (FSCS), was launched on 3 November 2021 to compensate investors.
Read more: LCF administration fees to pass £9m