A campaign group, spearheaded by British businesswoman and activist Gina Miller, has called for an independent review into the current chief executive of the Financial Conduct Authority (FCA), Andrew Bailey, as he is set to become the next governor of the Bank of England.
The True & Fair Campaign has come out with a report detailing poor financial regulation and consumer outcomes in the UK during Bailey’s term as the regulator’s boss.
Miller said: “Andrew Bailey’s tenure as chief executive of the FCA has been characterised by a toxic cocktail of negligence, incompetence and indifference to the needs of ordinary depositors, investors and pensioners.
“On his watch, hundreds of thousands of Britons have lost money – in many cases, losing their life savings which has devastated their lives, families and businesses.
“The report makes it clear Bailey is not a fit and proper person to be the next governor of the Bank of England. Were he to be confirmed in this highly responsible and prominent role, it would be a gross betrayal of the government’s duty to protect consumers, and a textbook example of rewarding failure.
“Bailey’s successor at the FCA must satisfy policymakers and the public they are competent and committed to protecting consumers, and to ending the apathetic culture within the FCA which Bailey appears to have effectively institutionalised,” she added.
The mini-bond scandal
The True & Fair Campaign took aim at the watchdog’s handling of the London Capital & Finance (LCF) case, which saw over 11,600 retail clients losing around £237m ($306.3m, €282.7m) after investing in mini-bonds.
According to its Asleep at the Wheel report, the FCA failed to intervene after a whistleblower got in touch with the regulator to flag up the products as “unsuitable for the unsophisticated investor”, in November 2015.
The whistleblower claimed the LCF website “raised more red flags than the Soviet Union”.
Less than three years later, a client of the investment firm contacted the FCA over concerns regarding the company, and said the regulator had a “quite promotional” attitude and he accepted its guidance.
But, at the end of 2018, the financial watchdog forced LCF to pull its marketing material, as it was “misleading” to clients.
Even though LCF was regulated by the FCA, not all of its activities were, resulting in just 135 victims receiving £2.7m in compensation, so far.
Work culture
The report goes on to criticise the working environment within the regulator.
It claims that cases of bullying and harassment have soared under Bailey’s tenure, with 30 cases investigated since 2016, compared to seven in the previous three years, and two incidents between 2009 and 2012.
This added on to the increasing number of sick days the FCA’s staff took in 2018, which totalled to 25,887.
The report claimed this to be the worst set of figures for the financial watchdog, and for it to be over 60% higher than the national average.
Additionally, 10% of the total members of staff had to take long-term sick leave for mental health reasons, between 2015 and 2018.
Inadequate responses
“The FCA has failed to spend adequate resources on whistleblowers; it spent less on its entire professional whistleblowing team in 2018 than it did on Andrew Bailey’s salary the same year,” the report said.
Georgina Halford-Hall, chief executive of Whistleblowers UK, is quoted in report as saying: “Most people want to do the right thing, but don’t trust the FCA because they have no confidence that it will bring about any form of investigation, and it may result in them losing their job.”
The True & Fair Campaign also highlighted issues concerning conflicts of interests, which were not “correctly followed up” by the regulator.
The report added: “The FCA was forced by the complaints commissioner in June 2019 to take ‘urgent steps’ to ensure its supervisory staff understood the consequences of ‘inadequate investigation and insufficient follow-up’ within its organisation, as information received about a conflict of interest at a regulated firm was not correctly followed up by the FCA.
“The conflict of interest between [an unnamed] advice firm and the company into which the funds were invested was not disclosed to [a] client, and the entire investment was lost when the company went insolvent in 2017.”
‘Systematic cover-up’
Anthony Stansfeld, of the Thames Valley Police and crime commissioner, strongly criticised the watchdog for its lack of action and oversight.
“There has been little effort or enthusiasm by many regulatory authorities, notably the Bank of England, the Serious Fraud Office (SFO) and the FCA, to either stop these frauds or bring the perpetrators to justice,” he said.
“These major frauds, unlike Libor and [payment protection insurance (PPI)], were not skimming off the top. They have ruined thousands of companies, and families and jobs have been destroyed.
“In the UK, nothing has been done. There would appear to be a systematic cover up.”
The True & Fair Campaign is now asking the newly appointed UK chancellor to undergo an “urgent review” of Bailey before he succeeds the outgaining governor of the Bank of England.
International Adviser reached out to the FCA for a comment, but the regulator did not respond in time for publication.
