The UK treasury has approved an independent investigation into the Financial Conduct Authority (FCA), focusing on the issues raised by the failure of investment firm London Capital & Finance.
This comes after International Adviser reported that the business is being jointly investigated by the UK’s Serious Fraud Office (SFO) and the UK financial watchdog after it took £236m ($313.3m, €276m) of investors’ funds.
It issued “misleading” mini-bonds and Isas on a non-advised basis, promising 8% returns to clients. Mini-bonds allow investors to lend money directly to businesses and are, in effect, IOUs that the companies sell to investors.
John Glen MP, economic secretary to the UK treasury, has agreed with the request put forward by the FCA’s board.
“The recent stories of those affected by the collapse of London Capital & Finance are incredibly concerning,” said Glen. “I want to make sure we have the strongest and safest financial system possible.
“By ordering this investigation, we will better understand the circumstances around the collapse and make sure we are properly protecting those who invest their money in the future.”
Independent investigation details
The FCA board said an independent investigation should cover questions in two areas:
- Whether the existing regulatory system “adequately protects retail purchasers of mini-bonds from unacceptable levels of harm”; and,
- The FCA’s supervision of London Capital & Finance.
Further information about the detailed terms of the review and identity of the independent reviewer will be released in future.
Failed firm
The joint investigation by the FCA and the SFO was opened after the the UK financial watchdog filed a referral to the National Economic Crime Centre.
On 4 March 2019, four individuals were arrested in the Kent and Sussex areas. All have been released pending further investigation.
Two days later, London Capital & Finance entered administration, with Smith and Williamson as the named representatives.
