High Court judge Dame Elizabeth Gloster has said that her investigation into the Financial Conduct Authority (FCA) over its handling of the failed mini-bond firm London Capital & Finance (LCF) will be delayed.
Gloster wrote a letter to FCA chairman Charles Randall on 15 May 2020 to state that issues stemming from the coronavirus pandemic has meant the investigation will be completed in September 2020 rather than the 10 July 2020 date originally given.
She said that the covid-19 outbreak has meant that interviews of FCA staff have not been carried out on time, after they were already postponed by the UK financial watchdog once before.
FCA delays impact timetable ‘significantly’
“This is not a decision I have taken lightly,” Gloster said. “I appreciate, as I am sure you do, that my decision to postpone my report, may cause some anguish amongst those people who invested with LCF, something we should all seek to minimise.
“I do not think it is disputed that the FCA’s delays and difficulties in providing documents and information have had a significant impact on the timetable for my investigation.
“For the avoidance of doubt, I accept this explanation and don’t consider, nor am intending to imply, that the delays experienced in receiving documents and information from the FCA have been intentional or the result of deliberate non-cooperation.
“However, as I am sure you will appreciate, these delays have impacted my timetable significantly such that my team was only in a position to begin the interviews of junior FCA employees in March 2020, having originally planned to start those interviews in December 2019/January 2020.
“Assuming the interviews of senior employees are completed by mid-June 2020, it clearly will not be feasible for me to complete the report… by the July 2020 deadline.”
Gloster expects interviews of senior FCA staff, including former chief executive Andrew Bailey, to be interviewed during the first half of June 2020.
Without any “significant issues”, Gloster hopes the report will be finished by end of July or early August 2020.
The revised target date for completion of her investigation is 30 September 2020.
FCA accused of ‘dirty tricks’
A spokesperson for the campaign group LCF Bondholders told Portfolio Adviser sister publication International Adviser: “It’s always frustrating when delays happen but no one could have done anything about delays due to the fallout from the covid-19 pandemic.
“But what is very upsetting is that the FCA and its staff have, outside of the pandemic, delayed providing both documents and FCA staff (to be interviewed) for the enquiry.
“Delays and dirty tricks continue at the FCA which summarises their entire attitude to this scandal and savers from the very outset.”
In February 2020, a campaign group, spearheaded by British businesswoman and activist Gina Miller, unveiled a report called Asleep at the Wheel, which said that the FCA failed to intervene years earlier after a whistleblower got in touch with the regulator to flag up the products as “unsuitable for the unsophisticated investor”.
The whistleblower claimed the LCF website “raised more red flags than the Soviet Union”.
The Financial Services Compensation Scheme (FSCS) started issuing decisions on claims relating to misleading financial advice provided to LCF clients at the end of May 2020.
The lifeboat scheme said it has completed its analysis of all the information it was able to gather –totalling around a million data points – and has started reviewing individual claims.
But it is going to be a lengthy process, which the FSCS expects to be completed by the end of September 2020.
In February 2020, the FSCS confirmed that only 159 victims were eligible to receive compensation, as they switched from stocks & shares Isas to LCF bonds, but they represent just 1.3% of the 11,600 victims that lost £237m in the LCF mis-selling scandal.
