City regulator jeered by scandal victims

By Roger Baird on 18th July 2019

Fintech

Financial Conduct Authority boss Andrew Bailey has faced a string of financial collapses in recent months.

City regulator jeered by scandal victims
Image source: Company supplied

The head of the City regulator was jeered at a public meeting following a spate of high-profile collapses that have tarnished the body’s reputation.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), was heckled at the watchdog’s annual public meeting in Moorgate, London, yesterday.

Angry small-scale investors shouted “stop protecting the crooks” and “run away slimy” as Bailey and his chairman, Charles Randell tried to wrap up the two-hour meeting attended by around 350 people.

The FCA has been rocked by several financial collapses in recent months that have hit small investors, such as the demise of peer-to-peer lender Lendy in May, which fell into administration with £160m in outstanding loans and with more than £90m in default.

 

String of failures

Also, the watchdog handling of investment firm London Capital & Finance (LCF), which collapsed in January, is being independently reviewed. LCF sold high-risk mini-bonds, despite advertising its product as a low-risk individual savings allowance, its failure left around 11,500 small investors facing as much as £236m of losses.  

Small businesses and investors were also angry at the watchdog’s handling of the June suspension of star asset manager Neil Woodford’s £3.5bn flagship fund, and the Royal Bank of Scotland’s now-defunct Global Restructuring Group, which is accused of seizing the assets of struggling small businesses between 2008 and 2013.

Bailey, who is a frontrunner to replace Bank of England governor Mark Carney in January, told the meeting it was difficult to track firms that exist on the “perimeter” of financial regulation.

 

‘Bad actors’

He said: “Technology is an important part of this. Innovation offers huge opportunities for consumer good . . . But it can also be an enabler of new forms of harm. We often see examples of this taking place today at the blurry edges of the regulatory boundary – where grey areas create opportunities for bad actors.”

Bailey added: “The question of what sits inside and outside this boundary – also known as the regulatory perimeter – is a matter of great importance for consumers and firms alike. It matters because it determines where consumers are protected, and where they aren’t; when we can take action, and when we can’t.”

 

‘Built on a lie’

Bank of England Governor Mark Carney said last month that open-ended funds like Woodford were “built on a lie” by saying they can hand investors their money back on a daily basis. 

However, at a news conference after the FCA’s stormy meeting, Bailey said: “I don’t share the view that open-ended funds are per se bad. I do think that the Woodford case . . . tells us a number of things about how you have to manage illiquid assets.”

He added: “We don’t have evidence to suggest that there are other firms acting in the way that Woodford did.”

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