Source · Select Committees · Treasury Committee
Recommendation 11
11
The case of LCF illustrates how important it is that the FCA looks at a...
Conclusion
The case of LCF illustrates how important it is that the FCA looks at a regulated firm’s activities both within and outside the perimeter of regulation. The FCA’s failure to consider issues raised in LCF’s unregulated bond business led to red flags being missed. (Paragraph 92) 50 The Financial Conduct Authority’s Regulation of London Capital & Finance plc
Government Response
Acknowledged
HM Government
Acknowledged
We appreciate that these are difficult issues. With police forces now spending less than 1% of its resources on fraud investigations when, according to Action Fraud, fraud accounts for 1 in 3 crimes, we can understand the desire to look to regulators for a greater contribution. There are, of course, no easy answers. For instance, reconfiguring the FCA to prosecute serious and/or volume frauds would involve major up-front investment and significant time to operationalise, and would require an ongoing source of funding. Such reconfiguration may also lead to a wider rebalancing of resources, in the form of causing the FCA to devote additional resource to prosecuting wrongdoing, some of which may have limited direct relevance to our role as regulator of the financial services industry, when those resources could have greater impact through prioritising measures which protect consumers of financial services, and prevent fraud by authorised firms. We value the work of the Committee through its Economic Crime inquiry, and will respond to the final report. In the meantime, to the extent it may assist, the Committee will be aware that Mark Steward explained the limitations on the FCA’s investigation and prosecution powers in respect of fraud offences in his letter to the Chair dated 14 July 2021.