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FCA boss defends role in £237m mini-bond collapse

Andrew Bailey has defended the regulator’s handling of the collapse mini-bond manufacturer London Capital & Finance

FCA boss defends role in £237m mini-bond collapse

Head of the Financial Conduct Authority Andrew Bailey has defended the regulator’s handling of the collapse of mini-bond manufacturer London Capital & Finance following the launch of a criminal enquiry.

The company, which had strayed into the FCA’s remit by packaging its unregulated products in regulated ISA wrappers, was ordered to suspend its accounts in December. It entered administration in January.

Accountants have warned that as little as 20% of the £237 million run by the firm may be recovered.

Both the financial press and a number of financials advisers had earlier sounded the warning about the company and its marketing, which had claimed to offer a ‘secure’ 8% yield by lending to small firms.

Quizzed at the presentation of the FCA’s 2019/20 business plan yesterday, chief executive Bailey (pictured) said initial warnings about the firm were received when he was still at the Prudential Regulation Authority.

‘It is a simple matter of fact that although I was on the board I wasn’t chief executive when we received intelligence on [London Capital & Finance] in 2015, therefore I cannot speak with authority on how we dealt with the warnings we received at that time,’ he told the Times

‘However, what is important is that we establish what happened and what lessons should be learnt. I am determined that we do that and we will make the findings of the review public.’

The FCA has launched an investigation into its handling of the case and added that it is probing other companies in the sector.

Four individuals were last month arrested as the Serious Fraud Office launched an investigation into the collapse of the company. All have been released pending further investigation.

Administrators at Smith & Williamson said that much of the money invested in LCF products appeared top have ended up in pockets of a ‘small number of connected people’ in ‘personal possession or control’ of the cash.  

S&W added its investigation into the company’s reported assets showed a ‘large number of borrowers do not appear to have sufficient assets with which to repay the company’.

In its report the administration team headed by insolvency partner Finbarr Thomas O’Connell said it was probing ‘a number of highly suspicious transactions… we are pressing these people to return those funds to us for the benefit of the bondholders and failing this we will pursue those individuals, as appropriate, for recovery of those sums’.

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