‘Give us the power to act’: watchdog wants help to tackle rogue investments

The City watchdog wants more powers to tackle a loophole that has led to investors losing millions to “unregulated” assets, Telegraph Money can disclose.

In a letter to this newspaper Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), admitted that his hands were tied, as it was for politicians to decide what activities fell under the its control.

“The Government and Parliament decide where to draw the boundary between regulated and unregulated activities, not the FCA,” he said. “As things stand, the FCA’s powers over the unregulated activities of authorised persons are more limited.”

Earlier this month Telegraph Money launched a campaign calling for a ban on the sale of unregulated investments by regulated firms. The loophole has led to consumers pouring their life savings into excessively risky deals.

Mr Bailey said the regulator would seek fresh powers to address the areas where consumers were being targeted, highlighting mini-bonds, cryptoassets and small business lending as three of the most dangerous areas.

He urged investors to be cautious before making investment decisions.

Some customers may have been given the false impression that their investments were safe because the firm selling them was approved by the FCA, even though the schemes themselves were not.

Mr Bailey said the regulator was working hard to improve awareness

of risky schemes and conceded that the current situation was “confusing and frustrating”. “This newspaper and others have pointed out the higher risks consumers face when investing and that there may be gaps in their protection,” Mr Bailey said. “We acknowledge there is more work to be done to protect consumers. “In the next year we will continue in our efforts to close down rogue firms and use all our resources to warn consumers about the risks and the dangers of unregulated schemes.” The investment loophole problem is getting worse, with those approaching retirement particularly at risk. In recent years thousands of people have transferred “gold-plated” final salary pensions into selfinvested personal pensions (Sipps). These plans allow savers to invest in a variety of ways, but billions of pounds have ended up in high-risk schemes that offer little protection when things go wrong. Seven providers collapsed or were rescued last year. More recently, the demise of “minibond” provider London Capital & Finance left thousands of investors £237m out of pocket. The firm was able to boast of FCA accreditation in its adverts, even though the investments themselves were unregulated. “You should be suspicious of any investment offering rates that seem higher than normal,” Mr Bailey warned. “If you do invest, be prepared to lose all the money you put in.” public warnings were issued by the regulator about potentially fraudulent firms last year