Financial Conduct Authority Investigation: London Capital and Finance

I have today laid a direction before Parliament requiring the Financial Conduct Authority (FCA) to carry out an independent investigation into the events and circumstances surrounding the failure and placing into administration of London Capital & Finance Plc (LCF), using powers under Sections 77 and 78 of the Financial Services Act 2012.

Following a request from the FCA, I announced on 1 April the Government’s intention to direct the FCA to launch an investigation into the events at LCF and the circumstances surrounding them. Today’s direction orders this investigation and sets out the terms on which it will be carried out.

The direction requires the FCA to appoint an independent person to carry out the investigation on its behalf, with the approval of HM Treasury. I have approved the FCA’s appointment of Dame Elizabeth Gloster to carry out the investigation on its behalf. The investigation is expected to run for 12 months.

The investigation will look at the actions, policies and approach of the FCA, as the institution with statutory responsibility for the authorisation and supervision of LCF during the relevant period. It will focus on whether the FCA discharged its functions in a manner which enabled it to effectively fulfil its statutory objectives, and may consider any other matter deemed relevant for this purpose.

This independent investigation is separate to the investigation by the Serious Fraud Office, working in conjunction with the FCA, into individuals associated with LCF.

I have also announced today that, alongside this independent investigation, the Government will separately review the wider policy questions raised by the case. This will include research into the wider market for non-transferable securities, such as mini bonds, and their role in the economy. The Treasury will begin work alongside this to consider the regulatory arrangements currently in place for the issuance of these investments, including the financial promotions order which governs the marketing of those products.

The Government are committed to creating a stronger and safer financial system. The independent investigation into the supervision of LCF will ensure that the events and circumstances surrounding the collapse of LCF are better understood. Its findings will help to properly protect those who invest their money in the future.

Copies of the direction are available in the Vote Office and Printed Paper Office.

[HCWS1584]