FCA pledges to protect consumers after LCF scandal

The Financial Conduct Authority pledged to do more to protect consumers and shut down harmful firms as the regulator seeks to restore its reputation after the London Capital & Finance (LCF) scandal.

The FCA said it would hire 80 more people to shut down problem firms that do not comply with basic regulations. The watchdog also said it would hold itself accountable against targets when protecting consumers.

The regulator made the pledges after it was blamed for not regulating LCF properly. LCF collapsed in 2019 leaving more than 11,000 investors in "mini bonds" with losses totalling £237m. The FCA was run by Andrew Bailey, now governor of the Bank of England, at the time.

An independent report said in December 2020 that the FCA failed in its regulation of LCF and listed various mistakes made by the regulator. The government is paying compensation of up to 80% of losses to the investors.

The FCA said it was also stepping up consumer protection action because the rising cost of living could tempt consumers into products promising higher returns.

Nikhil Rathi, the FCA's chief executive, said: "Our new strategy enables the FCA to respond more quickly to the rapidly changing financial services sector. It will give us a foundation to continuously improve for the benefit of our stakeholders, and respond swiftly to economic and geopolitical developments."

Rathi has had a tough time since taking over at the regulator in October 2020. He has had to deal with the fallout from the LCF scandal and his reorganisation plans have caused unrest among the FCA's employees, leading to a series of departures.