Accountancy firms face scandal probe

Investors lost life savings in scandal

CITY: The auditing watchdog has opened a series of inquiries into some of the UK’s biggest accountancy firms over an investment scandal which hit pensioners’ life savings.

The Financial Reporting Council (FRC) is to investigate EY, PwC and Oliver Clive and Co which signed off accounts for London Capital and Finance.

THE AUDITING watchdog has opened a series of inquiries into some of the UK’s biggest accountancy firms over an investment scandal in which pensioners lost large chunks of their life savings.

The Financial Reporting Council (FRC) said it would investigate EY, PwC and Oliver Clive and Co over the accounts they signed off for London Capital and Finance.

EY and PwC each audited a set of annual results in 2016 and 2017, the FRC said. Oliver Clive audited the company for a month in April 2015.

This was years before London Capital and Finance (LCF) became a major investment scandal, leaving pension savers and many retirees out of pocket.

Around £237m of investors’ cash was still inside the scheme when it collapsed in January last year.

With no way to get their money out, many investors are unlikely to receive anything back at all.

PwC said: “We will co-operate fully with the FRC.

“We are committed to delivering consistently high quality audits and in June 2019 introduced a major ongoing programme to enhance audit quality across the firm.”

LCF was an unregulated company, which sold what the Financial Conduct Authority calls minibonds, and is not covered by the Financial Services Compensation Scheme, which can pay out up to £85,000 to wronged investors.

However, the Scheme is currently investigating whether some investors may still be able to claim compensation because of the way the investments were marketed.

Around 11,000 savers who were desperate to get some return on their money, with interest rates at historic lows, pumped their cash into the LCF scheme.

Many have given up hope of ever seeing that money back, but they have showed great determination in holding people to account over the failure.

In January, hundreds of investors attended a meeting organised by Dame Elizabeth Gloster, a former Court of Appeal judge.

She is probing the actions of the Financial Conduct Authority over the scandal and is expected to report her findings later this year.

She was appointed in July last year, when she said her inquiry should be complete within 12 months.

While she had no statutory powers to compel people to be interviewed, she said in January that Bank of England governor Andrew Bailey, who previously ran the FCA from July 2016, was among those she wished to speak to.

Her inquiry looks solely at the FCA’s handling of London Capital and Finance, and is separate from the criminal investigation into the firm by the Serious Fraud Office.

The news comes just a few months after Blackmore Bond, another mini-bond seller, collapsed with around £40m trapped inside.

Many investors in LCF also put money into Blackmore, which had been raising money to invest into property developments.

We are committed to delivering consistently high quality audits.

A statement from PwC.