The FCA has been accused of unlawfully changing its complaints scheme “via the backdoor” to avoid paying compensation.
Last year the Financial Conduct Authority published guidelines that said consumers would only be entitled to compensation when the regulator was ‘solely or primarily responsible for their losses. The British watchdog is now under investigation by the Financial Regulators Complaints’ Commissioner. These changes were announced shortly after it was facing hundreds of claims from consumers who had lost more than £200m in the collapse of investment firm London Capital & Finance (LCF) in 2019.
The rules currently state victims of financial scandals can claim ex-gratia compensation pay-outs from the FCA where it has failed to safeguard consumers.
Thousands of victims of the LCF scandal have complained to the FCA. Most have been refused compensation for its admitted regulatory failings but have been offered settlements of between £50 and £125 because of the delays in dealing with their complaints.
Amerdeep Somal, the Financial Regulators Complaints Commissioner, is now investigating the refusals. A confidential draft report of her preliminary findings seen by the Observer says the watchdog tried to make changes to its complaints scheme “via the backdoor” which appeared “contrary” to its statutory purpose.
HM Treasury announced a £120m scheme in April to pay compensation to LCF bondholders. Some investors were also able to make claims under the Financial Services Compensation Scheme. The investors took separate action against the FCA because they want it to accept liability and pay compensation for its failures.
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.