Britain’s financial watchdog must act faster on scams, its chair said on Monday as he announced that senior officials face pay cuts and no bonuses following criticism of the regulator’s role in the collapse of London Capital & Finance (LCF) investment fund.
Financial Conduct Authority (FCA) Chair Charles Randell said the watchdog's officials were too worried that challenging a company could lead to the regulator being sued.
"It's absolutely clear in case after case, that where we have been averse to acting because of our perception of risk, we've ended up with a much bigger risk than we would have had if we had acted," Randell told parliament's Treasury Select Committee.
The FCA needs to act decisively and speedily to prevent consumer harm from fraud, even if it does not get it right each time, the FCA's CEO Nikhil Rathi told the Treasury Select Committee, adding that fraud is Britain's biggest crime.
The FCA is considering a much tougher gateway such as firms going through a "probationary" period initially before being granted authorisation to sell financial services, rather than getting "authorisation for life" from the start, Rathi said.
Simon Morris, a financial services partner at CMS law firm, said the FCA comments presage "a sharp and bolder approach to stopping firms that harm consumers".
Current Bank of England Governor Andrew Bailey had been chief executive of the FCA when LCF collapsed in January 2019 leaving more than 11,000 investors with losses of up to 237 million pounds ($330.64 million).
LCF was regulated by the FCA but the mini-bonds it sold were unregulated and they have now been banned for sale to retail investors.
An independent report last year said Bailey and the FCA's executive committee were responsible for deficiencies that led to LCF's collapse.
The report singled out executive committee members Jonathan Davidson and Megan Butler for specific failings.
Davidson is due to leave the watchdog in April. Butler is still on the executive committee, but in a new role in charge of the watchdog's internal transformation.
Treasury Select Committee Chair Mel Stride asked Randell why Butler was still in such a responsible role at the watchdog, selected after an internal competition of just two candidates.
Randell said the FCA board did not believe that the mistakes that Butler made and acknowledged amounted to serious culpability and therefore a need to ask her to leave.
"We decided that consequences that flow from this should be collective," Randell said.
Randall said the FCA had achieved an "outstanding performance" in the face of COVID-19 in 2020, but executive committee members would not be paid a bonus in the current financial year that ends in April.
Bonuses for the previous financial year were already scrapped.
Randell said that going forward, executive committee members will not be paid a bonus and the watchdog will reduce higher pay packages and the average level of executive pay.
($1 = 0.7168 pounds)
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