A group of MPs have harshly criticised the Financial Conduct Authority (FCA) for doing ‘too little too late’ or even ‘nothing’ in cases of wrongdoing by British financial services actors.
The All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services is a cross-party group of MPs and Lords from both the government (Labour) and the official opposition (Conservative). Its remit is to scrutinise policy and regulation around financial services.
In a recent publication, read in parliament yesterday, the group has taken aim at the FCA, the regulator of Britain’s financial services sector. This comes at a crucial time, with the government focusing on financial services as a pillar of British economic growth, with the sector accounting for around 8.3% of UK GDP.
The APPG states that although financial services contribute a significant chunk to the UK’s GDP it is far from a perfect sector. Bob Blackman CBE MP, the APPG’s Co-Chair, summarised the APPG’s view that the FCA has not been fulfilling its consumer protection duties.
“In recent years, a series of scandals have emerged in which financial services firms have stood accused of mistreating consumers and small businesses and the UK’s principal financial regulator, the Financial Conduct Authority, has been blamed for doing too little too late – or nothing – to prevent and subsequently remediate and punish alleged wrongdoing.”
Much of the APPG’s criticism has been related to internal workplace culture. MPs cite a report by New City Agenda in 2017 which identified a ‘suboptimal organisational culture’ at the FCA and made recommendations for change.
‘Incompetent at best, dishonest at worst’
In its own call for evidence, the APPG received 174 written responses from people ‘who had cause to interact’ with the FCA in ways other than financial business. The APPG’s concluded that ‘the picture painted is now pretty’.
The FCA has been slammed as ‘incompetent at best, dishonest at worst’ by the MPs, who also accused the regulator’s actions as being slow and inadequate, its leadership of being opaque and unaccountable.
The regulator’s alleged failures are diverse, as outlined in the report. MPs have cited alleged pension and investment scams, cases of bank misconduct towards SMEs, misconduct by payments institutions, cases of non-investment scams and mortgage prisoners being unable to resolve issues with the regulator.
A final area of interest for MPs was financial whistleblowers, specifically how the FCA handled these cases and what protection was offered to these individuals. This is not a new concern, with the WhistleblowerUK non-profit organisation raising this back in August.
Ben Lake MP, Plaid Cymru MP for Ceredigion Preseli, said: “The level of financial crime that ordinary people are exposed to these days is totally unacceptable and we know the consequences of it can lead to long term financial and emotional carnage for the innocent individuals unfortunate enough to become victims.
“Whilst I don’t just hold the FCA responsible for this failure to protect, it is a matter of fact that the FCA has a duty through parliament to provide an appropriate degree of consumer protection.”
Perhaps most damning for the regulator were submissions to the call for evidence from former FCA employees. These individuals highlighted cases of non-action, whether to consumer or business enquiries, and gave the impression enquiries are often left unresolved.
The issue of culture was also addressed, with respondents highlighting a lack of transparency and openness. Related to this, a concern has been raised with a perceived ‘revolving door’ problem whereby people transition regularly between jobs at the FCA and with the firms it regulates.
Overall, the APPG has highlighted 18 different areas of concern relating to the FCA”s organisation and how it operates. This includes the aforementioned area of culture, conflicts of interest, a general lack of integrity, poor use of powers, shunning of responsibility, poor treatment of whistleblowers and wasting of money.
The report recommends that the FCA make changes to its internal culture, apply greater standards of integrity across its organisation, be more responsive with stakeholders, establish clearer guidelines around whistleblowing and work to solve the ‘revolving door’ employment issue.
Publication came shortly after the FCA published its regulatory roadmap for UK crypto, a major moment for the British crypto sector – and one which has been overshadowed by the MPs allegations in most media reporting.
The government will likely be paying close attention to the report’s accusations and recommendations. Rachel Reeves, Chancellor of the Exchequer, has been focusing heavily on supporting financial services as a key UK economic growth driver. Policymakers will likely want assurances that this sector is being regulated competently.
Bambos Charalambous, Labour MP for Southgate and Wood Green, commented: “One thing is certain – it is vital that such an important sector for the UK economy as our financial industry is regulated by an organisation that we can all have trust and confidence in; and it’s clear we’re a long way away from that at the moment.”
The FCA has not responded to the report, but an FCA spokesperson told the Financial Times: “We sympathise with those who have lost out as a result of wrongdoing in financial services, however we strongly reject the characterisation of the organisation.”
