WATCHDOG HALTED LCF RAID OVER GUN FEAR
The City watchdog delayed a crucial raid on London Capital & Finance over concerns there were guns on the firm’s premises.
The revelations were made in a damning report into the Financial Conduct Authority (FCA) handling of the LCF disaster by Dame elizabeth Gloster, a former Court of Appeal judge.
LCF, founded in 2012, tumbled into administration in January last year after selling so- called minibonds to savers, leaving 11,600 victims £237m out of pocket.
The scandal has heaped embarrassment on Bank of england governor Andrew Bailey who was chief executive of the FCA at the time, and he has apologised.
The report shows the regulator dithered on every level, including when it came to raiding LCF’s Kent offices.
After investigating the company in late 2018, the FCA decided to visit the LCF offices in Tunbridge Wells and check the running of the company.
The unannounced visit was scheduled for November 21 but, just two days before the raid, FCA workers got cold feet amid suggestions that there might be firearms on the premises. As a result the FCA said it would not launch the raid unless there was police backup. But after consultation, Kent Police refused to attend as they did not consider the firearms risk ‘significant’.
It is not known who at LCF owned the gun but sources said one of the directors had a shotgun licence.
The raid took place on December 10, meaning crucial time had been lost as LCF was still selling its doomed minibonds. Gloster’s report criticises the delays to the raid, stating that the FCA knew the firm was raking in £15m a month in new investment. She said: ‘Throughout this period, the FCA was aware that there was ongoing potential for consumer detriment if the concerns regarding LCF were justified.’
She added: ‘The investigation accepts that the FCA has a duty to ensure the safety of its staff and that the firearms issues were a legitimate concern.
‘however, the investigation concludes that there are areas where the FCA could and should have acted more quickly in connection with the 2018 intervention, particularly given the concerns that had been identified regarding consumer detriment.’
The incident is yet further evidence that the FCA failed to get to grips with the LCF scandal early enough.
Call handlers received allegations of fraud as early as 2016 but regularly failed to refer them to the supervision division. The watchdog also failed to act on an anonymous letter it received in early 2017 which it dismissed.
The intelligence team at the FCA finally ‘stumbled’ upon LCF in October 2018 while looking into another case. The team passed its concerns to the supervisory team, but it was too late to protect investors.
A FCA spokesman said: ‘ The FCA conducted a risk assessment when planning the unannounced site visit as a result of which it identified firearms in connection with the premises.
‘The FCA delayed the visit until it was confident that it would not put staff in harm’s way. Unlike the police, FCA staff do not have body armour and are not trained in making firearms safe on the premises. The FCA took steps to prevent the dissipation of investor funds in the meantime.’