Watchdog delayed attack on London Capital & Finance over concerns that guns were on company premises
The city watchdog delayed a decisive raid on London Capital & Finance over concerns that guns were on the company’s premises.
The revelations were made in a damn report of the Financial Conduct Authority’s (FCA) handling of the LCF disaster by a former appellate judge, Dame Elizabeth Gloster.
LCF was founded in 2012 and fell into administration in January last year after so-called mini bonds were sold to savers. 11,600 victims had £ 237 million out of their own pocket.
London Capital & Finance fell into administration in January last year after minibonds were sold to savers, leaving 11,600 victims £ 237 million out of their own pockets
The scandal embarrassed the Governor of the Bank of England, Andrew Bailey, who was FCA General Manager at the time, and he has apologized.
The report shows that regulators at every level have faltered, including raiding LCF’s Kent offices.
After an investigation into the company in late 2018, the FCA decided to visit the LCF offices in Tunbridge Wells and review the governance of the company.
The unannounced visit was scheduled for November 21, but just two days before the raid, FCA staff got cold feet because they suspected firearms might be on the premises.
As a result, the FCA said they would only start the raid if there was police support. However, after consultation, the Kent Police refused to attend because they did not consider the risk of firearms to be “significant”.
It is not known who owned the gun at LCF, but sources say one of the directors held a shotgun license.
The raid took place on December 10th, which meant that crucial time had been lost as LCF was still selling its doomed minibonds.
Gloster’s report criticizes the delays in the raid, stating that the FCA knew the company is bringing in £ 15 million a month in new investments.
She said, “During that period, the FCA realized that there is continued potential for consumers if concerns about LCF are justified.”
She added, “The investigation accepts that the FCA has a duty to keep its personnel safe and that the guns issue was a legitimate concern.
“However, the investigation concludes that there are areas where the FCA could and should have acted faster in the context of the 2018 intervention, particularly given the concerns that have been identified about the harm to consumers.”
The incident is further evidence that the FCA did not get the LCF scandal under control soon enough.
Answering machines received allegations of fraud as early as 2016, but regularly did not refer them to the surveillance department. The watchdog also didn’t respond to an anonymous letter it received in early 2017 that it rejected.
The FCA intelligence team finally came across LCF in October 2018 while investigating another case. The team passed their concerns on to the oversight team, but it was too late to protect investors.
An FCA spokesman said: “The FCA conducted a risk assessment in planning the unannounced site visit that identified firearms associated with the premises.
‘The FCA delayed the visit until they were confident they would not put the staff at risk. Unlike the police, FCA staff do not have personal protective clothing and are not trained to make firearms safe on the premises. The FCA has taken steps to prevent the liquidation of investor funds in the meantime. ‘