Supplementary report on the FCA’s ‘poor performance’ released

A supplementary report about the Financial Conduct Authority’s (FCA’s) “poor performance” in relation to its consumer protection remit has been released by the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services.

The new report is being produced due to the APPG’s “disappointment” with how the FCA responded to its November 2024 report.

That report was based on widespread criticism of the regulator from a range of independent sources, including external reports on the poor handling of the London Capital & Finance, Connaught, Interest Rate Hedging Product and British Steel Pension Scheme scandals.

Additionally, it included the testimony of many stakeholders who had interacted with the FCA, including scam victims and FCA employees, past and present.

APPG CBE MP, co-chairperson Bob Blackman said: “The Purpose Statement of our APPG is to advocate for the victims of financial misconduct, crimes, scandals, frauds and regulatory failures, by driving positive, progressive and purposeful reforms that achieve a fair, trusted and just system…where the service providers, regulators and government agencies provide appropriate protection and deliver good outcomes, including redress for historical wrongs.

“As such, the conduct and performance of the FCA is of great interest to us. When we were working on the original report we had no intention of producing a supplementary report shortly after, but doing so has proven necessary because of the unconstructive way the FCA has responded to our original report.

“When I delivered my speech in Parliament to launch our November 2024 report, I mentioned a nagging concern I had, that despite the best endeavours of the APPG to produce a report the FCA would take seriously and engage with positively, there was always the chance the regulator might respond in a disappointing, dismissive and defensive way.

“If so, that would point once again to it being in a continued state of denial – seemingly unable to absorb evidence-based criticisms being made of it.”

The reasons for disappointment with the FCA’s response to the original report are:

• The FCA has not responded at all to requests to meet with them to discuss the report and the issues it raised.
• The FCA has failed to meaningfully challenge any of the many claims and allegations made about it in the report by the 174 people who stepped forward to give their testimony.
• The FCA’s response to the widespread media coverage about our original report was that the report dealt with historic issues that had already been remedied through its Transformation Programme.
• Through disclosures achieved through a Freedom of Information Request, it has been discovered that the FCA is claiming that ‘85% of FCA stakeholders agree the FCA achieves its objective of protecting consumers’, but we have been unable to find anything to back this up.

The Supplementary Report will be issued in instalments. Instalment #1 sets the scene and each subsequent instalment will be a study of how the FCA has handled a particular recent scandal where it is felt there has been regulatory failure, with an emphasis on what the FCA’s decisions and actions have been.

Also, the case studies will be focused on recent scandals such as Woodford, Wealthtek, Philips Trust Corporation and Car Finance, so the FCA “will not be able to hide behind the claim that the issues raised are historic”.

APPG Vice Chair Lord Davies of Brixton added: “It’s critically important that the UK has a financial regulatory framework that upholds market integrity and gives consumers good reason to place their trust and confidence in it.

“But all the time the FCA proceeds from one scandal to another the adverse publicity that inevitably follows undermines trust and confidence, and thereby the prospects for economic growth. Our APPG is merely stating that the evidence shows the FCA has problems that need addressing. The red flag we are continuing to wave vociferously should not be ignored; and we’ll keep waving it until it isn’t.”

However, a spokesperson for the FCA in response to this latest report said: “The Board discussed the report in December. As the Government acknowledged in its response, we have made significant changes since the events featured in the original report took place and we do not recognise the characterisation of the FCA in the report.  Where there are further lessons to learn, we will take this forward as part of our ongoing work to continuously improve.

“Parliament and Government have numerous mechanisms to hold us to account on our effectiveness. This includes scrutiny by parliamentary committees and, since the original report, we have given evidence twice and the report was not raised with us by either committee.

“Our chair has offered to meet with the APPG’s leadership to discuss our work.

“We recognise there are a range of views in Parliament about our objectives.  We continue to protect consumers while embracing the new secondary growth and competitiveness objective given to us by Parliament. As we set out in our recent letter to the Prime Minister, we welcome a debate and as broad a consensus as possible about the appropriate risk appetite we should work to.”