A British financial watchdog has been accused of unlawfully changing its complaints scheme in a bid to avoid paying compensation to victims of failed funds or investment scams. The Financial Conduct Authority (FCA) is said to have changed its complaints scheme just as it was facing hundreds of claims from savers who had lost more than £200mn in the collapse of the investment firm London Capital & Finance (LCF) in 2019.
While FCA denies acting unlawfully and insists it was “clarifying” the scheme’s guidelines, the watchdog is now being investigated by the Financial Regulators Complaints’ Commissioner over the controversy.
Under current rules, victims of financial scandals can claim ex-gratia compensation payouts from the FCA where it has failed to safeguard consumers. The regulator published guidelines in June last year, which said consumers would only be entitled to payouts when the regulator was “solely or primarily” responsible for their losses.
A member of the LCF bondholders campaign group, Andrea Hall was quoted in a report as saying, “They thought they would just change the rules and no one would challenge them. We wanted them to hold their hands up and pay compensation because they haven’t been punished. They wanted to shut that door on this wall of complaints on their regulatory failures. It is sheer arrogance.”
More than 1,000 victims of the LCF scandal have complained to the FCA and most have been refused compensation for its admitted regulatory failings. The Financial Regulators Complaints Commissioner’s office said the investigation into LCF complaints was ongoing and the commissioner would be considering responses to the preliminary report.
