"My colleagues and I are committed to implementing the recommendations and lessons learned which will require significant and necessary changes to the way we regulate, our use of data and intelligence, and our culture."
A review into the London Capital & Finance mini-bond scandal found that the FCA's failed to fulfil its statutory objectives, calling the handling "wholly deficient".
The investigation concluded the bondholders were "entitled to expect, and receive, more protection from the regulatory regime in relation to an FCA authorised firm than that which, in fact, was delivered by the FCA".
In response, the FCA has outlined a restructuring to join up its policy, supervision and competition functions.
As part of the changes, the FCA will undertake a “use it or lose it” exercise, with firms that have not used their regulatory permissions to earn any regulated income for the last 12 months at risk of having their authorisation revoked. The FCA says this will reduce the risk of firms having a permission to carry out regulated activity "purely to add credibility to their unregulated activities".
It will also implement new measures to tackle pension scams with DWP, enhance training for all frontline staff, and recruit additional prudential specialists to act as quality assurance and assess firms with complex business models.
The FCA has already made permanent the temporary restrictions it imposed on the marketing of speculative illiquid securities, such as those issued by LCF.
Charles Randell, chair of the FCA, said: "There are a number of things we could have done better in our supervision of these two firms and both reports highlight the need for the FCA to continue to change to better protect consumers from harm.
"We accept all the recommendations that have been made to the FCA and we are profoundly sorry for the mistakes we have made.
"The collapse of LCF has had a devastating effect on many investors and we will do everything we can to conclude our investigations as quickly as possible and support the recovery of further funds for investors.
"The FCA has always prioritised supervising regulated activities which affect the most vulnerable in our society, who often have very limited financial choices. We also introduced measures designed to prevent harm for those consumers who had more ability to choose. These reports not only highlight operational mistakes; they also indicate that the measures we introduced may not have been as effective as we wanted and challenge the balance that we struck at that time.
"Over the last few years we have already made significant changes in our approach to supervising firms. We have learned considerable lessons from what happened with LCF and Connaught and we will provide public updates as we implement the recommendations.
"Consumers must have trust in the FCA to do its job properly. We need to reinforce a culture in which people at the FCA are empowered and confident to take responsibility for bold interventions. The organisation has made progress in developing this culture in the last several years, and I’m proud of what we have achieved during the current coronavirus crisis. We know we have more to do.
"The FCA Board and I have every confidence that continuing the transformation of our organisation is the right way to bolster trust in the FCA and realise our ambitions for change."
Nikhil Rathi, chief executive of the FCA, added: "Having joined the FCA as Chief Executive in October, these reports into historic events make sobering reading.
"My colleagues and I are committed to implementing the recommendations and lessons learned which will require significant and necessary changes to the way we regulate, our use of data and intelligence, and our culture.
"We know that the FCA must make faster and more effective decisions, prioritise the right outcomes for consumers, markets and firms, and reform our approach to intelligence and information sharing. Our continuing action plan, specifically on our wider transformation programme and high-risk consumer investments, seeks to do this.
"The FCA is always going to have to make difficult risk-based choices about where to allocate resources and to strike a balance between regulatory action and consumer choice and responsibility. I hope that the mistakes the FCA made in these cases do not detract from the work and dedication of my colleagues over several years.
"We have demonstrated that when we act boldly, we deliver for consumers, markets and firms. With the continued dedication of all at the FCA and with the support and oversight of the FCA Board, I know that we can make the changes we need in the coming months and years to respond to these reports and deliver for UK consumers and markets."
