Earlier this year the Financial Conduct Authority (FCA), the financial services regulator, faced public pressure from MP’s to provide a clear timescale for publishing their findings into the collapse of the Woodford investment fund.
Approximately 300,000 investors throughout the UK have lost a combined, estimated £1 billion following the Fund’s collapse.
The FCA began their investigation in June 2019 but, at the time of writing, no clear timescale has been given for their published report. Meanwhile, investors whose savings are trapped in the now-defunct fund have been left in limbo.
The significant delay in clarity has prompted calls from some quarters for the FCA to hand their investigation over to an independent judge or QC.
The FCA’s vague response following said criticism suggested this would not be considered.
The regulator’s perceived failure to properly investigate and punish institutional wrongdoing, and to properly protect investors in the process, is nothing new.
In an industry where, historically, transparency and accountability have been sorely lacking, strong governance is desperately needed now more than ever.
Earlier this week it was another financial services compensation scheme, the Business Banking Resolution Service (BBRS), which found itself in the press for all the wrong reasons.
According to their official website, the BBRS “is a non-profit organisation set up to resolve disputes between eligible larger SMEs (small and medium sized enterprises) and participating banks”.
The BBRS was established in 2019 essentially to compensate victims of banking scandals. However, media outlets have reported that there has only been one successful case where compensation has been issued out of an estimated 626 complaints lodged since the beginning of 2020.
The main barrier to redress via the BBRS appears to be due to the fact that the Scheme’s eligibility criteria are extremely narrow which means that an estimated 85% of complainants are excluded at the outset.
A UK Finance spokeswoman said: “The BBRS is delivering a fair and transparent dispute resolution service in line with the banking industry’s commitment and with the involvement of external shareholders.”
The level of commitment to offering redress, and more specifically the impartiality of the Scheme, is being seriously questioned given that the Scheme itself is funded by seven large banks with a potential vested interest.
Victims of financial mis-selling and negligent financial advice already face an uphill battle when raising complaints against institutions with deep pockets. It is crucial that the UK Government recognise this imbalance of power and that they take steps to ensure that investors have viable, independent and efficient means of redress.
The City regulator has been publicly lambasted for its lack of progress following the Woodford collapse and the early signs suggest that the BBRS certainly does not offer the “fair and transparent” service that it purports to.
Change is needed and an overhaul of the regulatory services would certainly be a good place to start.
Blog by Kieran Smith, Associate