FCA accused of rushing consultation to minimise own failings

Written by Ruby Hinchliffe
26th August 2020

The Financial Conduct Authority’s (FCA) proposed compensation cap for its own failings has led to accusations that the regulator is rushing through a plan to minimise its liability, The Times reports.

The accusations come from campaigners and the FCA’s own complaints commissioner. The proposed cap on its complaints scheme comes before the publication of three independent reviews into the regulator’s competence.

The reviews concern the regulator’s handling of the sale of interest rate swaps to small and medium-sized companies, the collapse of London Capital & Finance and of Connaught Income Fund Series 1.

The complaints commissioner criticises the timing and lack of a spotlight put on the eight-week consultation

The FCA says it’s been in discussions with the complaints commissioner “for some time”. It also says it will take comments into account when finalising its proposal.

Accusations of “explicit fettering”

The FCA’s eight-week consultation proposes a cap of £10,000. This would cover the majority of compensation for financial losses where the FCA’s actions or oversights were the “sole or primary cause of the loss”.

Gina Miller, co-founder of the True and Fair campaign, has asked that the consultation be paused. She believes it should not be resumed until the findings of the three independent reviews into the FCA are made public.

The independent complaints commissioner, Antony Townsend, oversees the final stage of complaints made against the FCA and Bank of England.

He tells The Times that the FCA’s proposals “represent an explicit fettering of compensation for direct financial loss”.

The complaints commissioner, a role established in 2000, ensures victims of negligence receive compensation from the FCA. But – most of the time – the commissioner cannot sue the regulator for damages.

A rushed job with a deliberate lack of clarity

Townsend also criticises the timing and lack of a spotlight put on the eight-week consultation. Launched last month, it is four weeks shorter than normal.

The commissioner has said for some years that the FCA’s compensation scheme is not clear enough. He cites the “myth” that has emerged, which suggests the “scheme is not primarily a compensation scheme”.

“Where the fault is the regulator’s there appears to me to be no basis for arguing that full compensation should not be awarded,” Townsend tells The Times.

Failures cited by Townsend include the regulator’s inability to maintain a reliable register. As well as its lack of action despite repeated warnings concerning the three scandals under review.

Connaught Action Group, which represents victims of one of the three scandals, calls the consultation “desperate”.

Mark Bishop, a group representative, tells The Times: “A truncated consultation on plans to restrict the rights of the public, held over the summer holidays and during a pandemic, looks a desperate, crudely executed attempt to protect itself from liability for its incompetence.”