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UK Treasury Committee orders FCA investigation into collapse of P2P lender London Capital & Finance

Source: Treasury Committee

The Financial Conduct Authority (FCA) Board announces that HM Treasury will direct it to commission an ‘investigation by an independent person into the issues raised by the failure of London Capital & Finance (LC&F)’.

LC&F went into administration in January 2019 after taking £236 million of investor’s money. This followed concerns raised by the FCA in December 2018.

The FCA directed LC&F in December to withdraw its promotional material for its mini bonds on the basis that the marketing was “misleading, not fair and unclear”. Whilst the promotional material is regulated by the FCA, the product itself—mini-bonds—are unregulated.

Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, wrote to the FCA Board last month to request that it consider whether the tests around the need for a statutory investigation into possible regulatory failure surrounding LC&F have been met.

HM Treasury has the power to require the regulator to conduct such an investigation. Mrs Morgan also wrote to John Glen MP, Economic Secretary, to urge the Treasury to use this power if the FCA declines to investigate. It has been announced today that the Treasury will use this power.
Chair's comments

Commenting on the announcement, Mrs Morgan said:

“Last month I wrote to the FCA and the Treasury pressing the need for an investigation into events at London Capital and Finance.

“The decision by the Treasury to use its powers to direct the FCA to commission a review into LC&F is therefore welcome.

“The Committee will query why the FCA required the Treasury’s help to commission an investigation.

“The FCA and the Treasury must think innovatively about how the investigation can report and publish as quickly as possible. Investors will want answers.

“It is entirely possible that other firms are offering products to investors under the guise of FCA regulation, which may not be wholly the case. The Committee will want assurances the FCA is guarding against a similar outcome for other unsuspecting investors.”

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