"The independent FCA, on the other hand, shares our view, rather than the Government’s, that a more formal or structured approach would provide greater transparency"
The Treasury Committee published a report on the FCA's regulatory remit in August in which it suggested the government should introduce new formal powers for the FCA to request changes to the perimeter. This, it said, would allow the FCA to extend its remit to include parts of the market which are currently unregulated.
The calls follow the collapse of London Capital & Finance (LCF) earlier this year. LCF did not need to be authorised to issue the mini bonds but did need to be authorised to issue the promotion of the mini bonds. The FCA later said there should be an investigation into whether the existing regulatory system adequately protects retail purchasers of mini-bonds from unacceptable levels of harm.
Last week, the government said it would not give the FCA formal powers to request changes to its regulatory scope, despite the Treasury Committe stating that the current system creates a "grey area" between regulated and non-regulated activities which can be exploited, as in the case of LCF where the investments of over 14,000 bondholders are currently in jeopardy.
In the FCA’s response, which the Committee has published today, Andrew Bailey, chief executive of the FCA, said: “[W]e share the Committee’s view that there could be a more structured and transparent approach for identifying and engaging with HMT on perimeter changes. This could allow for a regular opportunity to consider what activities are covered by regulation, and enhance transparency surrounding changes to the FCA regulatory perimeter.”
Catherine McKinnell MP, interim chair of the Treasury Committee, said: “It was disappointing […] that the Government does not see the case for providing a formal power for the FCA to request changes to the perimeter.
“The Treasury Committee has recommended that the FCA is given the formal power to suggest changes to the Government over what it regulates, which could help the FCA to protect consumers.
“Disappointingly, yet perhaps unsurprisingly, the Government rejected our recommendation, opting instead to keep the opaque system as it is.
“The independent FCA, on the other hand, shares our view, rather than the Government’s, that a more formal or structured approach would provide greater transparency to the process.
“The Committee awaits the work promised by both the FCA and the Government, and we will continue to raise these issues in our evidence sessions.”
