" The FCA Board should set out whether firms are using their FCA-authorisation in a way that may be misleading to consumers"
London Capital and Finance went into administration in January after the FCA directed it to withdraw promotional material for its mini bonds which was “misleading, not fair and unclear”.
Whilst the promotional material is regulated by the FCA, mini-bonds are unregulated.
Nicky Morgan has asked the FCA to consider whether the tests around the need for a statutory investigation into possible regulatory failure surrounding London Capital & Finance have been met.
HM Treasury has the power to require the FCA to conduct an investigation. Morgan has written to Economic Secretary, John Glen, to urge the Treasury to use this power if the FCA declines to investigate.
Yesterday, the Serious Fraud Office, working in conjunction with the FCA, opened an investigation into former employees of London Capital & Finance.
On the 4th of March, four individuals were arrested in the Kent and Sussex areas and were later released pending further investigation.
Nicky Morgan said: “The FCA is currently investigating LC&F’s marketing material and the SFO is investigating individuals associated with the company.
“Yet there is a broader need to understand what can be learned in a regulatory sense from the events at LC&F.
“I have therefore requested that the FCA Board consider whether the failure of LC&F, the potential harm to those consumers involved, and the regulatory system that led us here, warrants a statutory investigation.
“If the FCA decline, I have asked HM Treasury to consider using its power to require the regulator to conduct such an investigation.
“Even if the regulator does not conduct an investigation, the FCA Board should set out whether firms are using their FCA-authorisation in a way that may be misleading to consumers, whether consumers need greater clarity on what such an authorisation does to protect them, and whether mini bonds should now be regulated.
“The stories of those affected by the actions of LC&F are distressing. The Government and the regulator must do all they can to prevent history from repeating itself.”
