The Financial Conduct Authority (FCA) has been slammed over its shortcomings in relation to a Cyprus financial advisory firm that had passported into the UK.
Complaints Commissioner Antony Townsend, pictured left, appointed in April 2014 to act as an independent scrutineer of the FCA, said that the FCA had taken too long to act after concerns had been raised about the firm by a couple whom it had persuaded to invest in a poor product.
Townsend said that the FCA should apologise to the couple who had made the complaint, and that the FCA register rules on passporting of EU firms was opaque and difficult to understand.
The couple complaining had been induced by the Cyprus firm to invest in a product that later went into liquidation, meaning all their money was lost.
Townsend’s report said that as early as April 2011 concerns had been raised that the firm was acting outside its authority while claiming to be “established” in the UK.
The FSA/FCA were aware of the “potential consumer detriment”, said Townsend, “and there were extensive interactions with the firm, and then with the Cyprus authorities, to try to resolve the situation.
“My conclusion is that the FSA/FCA made numerous attempts to deal with the problem, but that there appeared to be a reluctance to bring the matter to a head.
“While it is clear that the regulator was properly concerned about potential consumer detriment, the records do not suggest that anyone stood back, established the facts, and considered what the best options were, until the second half of 2013.
“The result was that the situation – and the potential risk – were allowed to continue for too long.”
FCA register ‘difficult to navigate’
A problem highlighted by the investigation was that the FCA register explaining “passporting” to consumers was unclear and hard to follow, and failed to spell out that those firms outside of the UK were not subject to the same level of consumer protection as UK ones.
“While I do not think that it can be said that anything on the FCA’s register is wrong,” said Townsend, “in this (as in other complaints that I have dealt with) I consider that the FCA’s register has been difficult to navigate, and lacking in readily comprehensible information for consumers.
“It would require considerable work for a consumer, on the basis of the bare information in the register, to understand that an FCA-registered firm was subject to different regulation, and different consumer protection arrangements, because of its EU status.”