The Financial Conduct Authority in the UK is seen as incompetent at best, dishonest at worst. This is the damning conclusion of an investigation by a cross-party parliamentary group. The 358-page report contains statements from 175 individuals who have had dealings with the FCA. Among them are victims of fraud, whistleblowers, and former employees.

„Regrettably, the evidence received suggests that there are very significant failings at the FCA,“ states Bob Blackman, Conservative co-chair of the All Party Parliamentary Group on Investment Fraud and Fairer Financial Services, writes in the foreword. „It comes across as an opaque organisation, accountable to no one, slow to act, and even slower to admit it has done anything wrong, and change.“

The APPG includes around 30 MPs and around a dozen members of the House of Lords. „As uncomfortable as it may be for the FCA leadership team to study the evidence-based critique that has been produced, presented, I do hope it can take the analysis and recommendations as they are intended – as helpful pointers for to where reform is needed,“ commented Liberal Democrat MP Chris Fox. Mr Fox is also one of the Vice Presidents of the British-German Chamber of Commerce and Industry.

But he was wrong about how the authority's would react. The FCA claimed that the picture painted by the report did not correspond to what it experiences on a daily basis. The report did not do justice to the „dedication and commitment“ with which the authority pursues its objectives. Some of the cases included in the report, such as the collapse of London Capital & Finance (LCF), have already been learnt from, and changes have been made.

In an email to staff quoted by the Financial Times, the authority's leadership complained that it had not been given the opportunity to respond in advance to the statements and conclusions contained in the parliamentarians' report. The FCA also said that it had not been sent a copy before publication.

„When we get feedback, it's important that we take a step back and think about whether there are lessons we can learn from it,“ the FT quotes from the email.

Given the slowness with which the authority is proceeding, it is not possible to predict when any action will be taken. The FCA was created out of the wreckage of the Financial Services Authority (FSA), set up by Labour Chancellor of the Exchequer Gordon Brown. The collapse of Barings, and the Bank of Credit & Commerce International scandal, had convinced the Labour government that self-regulation alone was not enough to ensure stability. However the financial crisis clearly demonstrated that the „light touch“ regulation pursued by the FSA was not enough.

The successor authority is now just as discredited. This is due to cases such as London Capital & Finance and Lendy. According to the BBC, independent financial advisors had already pointed out misleading advertising by LCF to the authority in 2015.

The scandal at peer to peer lending platform Lendy centred on the fact that Lendy attracted retail investors with interest rates of 8% before its collapse. They invested more than 230 million pounds in mini-bonds. The company marketed them as a tax-advantaged savings plan (Individual Savings Account, ISA).

Investors may have been inclined to believe the claims because the firm advertised that it was regulated by the FCA. The ISA is a well-known product and one would not expect a total loss. Mini-bonds, on the other hand, are not subject to FCA regulation.

In 2020, former judge Elizabeth Gloster concluded in her independent investigation into the scandal that the injured parties were entitled to better protection from the regulator. The authority had failed to fulfil its statutory duties. It also criticised delays and errors by the FCA in providing information to the team carrying out the investigation.

When Lendy, which had advertised itself as offering loans secured on UK property, collapsed, 20,000 risk-taking customers had taken out 54 loans totalling 152 million pounds. The FCA had granted Lendy authorisation as a peer-to-peer platform at a time when its survival was already fundamentally in doubt. It kept the Portsmouth-based company on a tight leash. But in the end, its collapse surprised them just as much as the investors.

The prominent lawyers who conducted investigations against the regulator mostly kept a low profile. Prominent anti-Brexit campaigner Gina Miller, on the other hand, did not mince her words when Andrew Bailey, who was temporarily in charge of the FCA, made to move to head up the Bank of England. „Falling asleep at the wheel“ was the title of her 36-page pamphlet. It deals with the mishaps that occurred under Bailey's leadership.

In addition to LCF and Lendy, it also dealt with the scandal surrounding Woodford Investment Management's flagship fund, and the handling of past scandals at Royal Bank of Scotland (now Natwest) and Lloyds Banking Group.

Andrew Bailey's tenure as CEO of the FCA was characterised by a toxic cocktail of negligence, incompetence, and indifference to the needs of ordinary savers, investors and pensioners,“ Miller said at the time. „Under his watch, hundreds of thousands of Britons lost their money – in many cases their entire life savings, destroying their lives, families and businesses.“

In 2015 the-then Chancellor of the Exchequer George Osborne sacked FCA chief executive George Wheatley. Under his leadership, fines had been imposed like never before. Interim chief executive Tracey McDermott first neutralised the Senior Managers Regime. It was intended to make it possible to personally prosecute people from the top levels of the financial sector. The review of the banks' corporate cultures announced by Wheatley was cancelled after a few months without a final report. After McDermott floated to Standard Chartered on her golden parachute, Bailey took over.