The Financial Conduct Authority (FCA) has apologised for its handling of recent scandals that have had a huge impact with investors losing millions of pounds and admits that changes need to be made in how the Financial Services Compensation Scheme is funded.
Debbie Gupta head of life insurance and advice at the FCA said, in an organised conference by trade association Pimfa: “the regulator needs to change, in recent reports into the regulators handling of the London Capital & Finances and Connaught scandals were described as serious reading”.
After LCF, the mini bond company, went into administration in 2019 investors lost around £236 million and the Connaught Income fund failing in 2012 losing investors £104 million.
After these, it has left the FCA no choice but to accept a change in major reforms to the consumer investment market.
Improvements are required to the Financial Compensation Scheme (FSCS) but is not the cause of the higher FSCS or Professional Indemnity Insurance premiums for financial advisers.
At the beginning of this year, the FCA forecast the levy will rise by 48% to over £1 billion this year as several firms will collapse due to the impact of Covid.
Wealth firms including us will be hit by the levy hike and a survey conducted by Pimfa saw that almost two-thirds of owners and CEOs of financial planning and wealth management businesses did not trust the FSCS to deliver fair outcomes for the industry or consumers.
Issues with the levy will continue to be monitored by the FCA and the FSCS to earmark improvements that need to be made.
The FCA has also added to a team to ensure the agency is able to make fast and effective decisions.
The FCA is also under more pressure by campaigners and politicians to conclude its ongoing investigations into the implosion of Neil Woodford’s Investment empire which collapsed in 2019 holding £3.9 billion of investors cash with millions due in compensation.
Thousands are paid by financial services firms to fund the FCA, the Financial Ombudsman and the FSCS. To us, it feels that they can continue to not monitor firms with the biggest risk to consumer detriment and simply call on the industry to pay more to cover their failings. We have not seen any 'heads roll' due to their failings but they are happy to penalise the industry for any failings.