Fast track for bond probe
Good to know that the running tumult in the House of Commons has not totally gummed up Government.
City minister John Glen has moved with rocket-fuelled speed to order the Financial Conduct Authority to set up an independent investigation into the collapse of London Capital & Finance Group (LCF), which left 11,500 savers, who invested in £237m of ‘minibonds’, marooned.
The probe will be independent and the results published. This is in sharp contrast the ‘section 166’ inquiry which the FCA used to look into the Global Restructuring Group scandal at Royal Bank of Scotland.
Past inquiries into the collapse of BCCI by Lord Justice Bingham and Barings by the now defunct Board of Banking Supervision were completed with admirable swiftness and openness.
Andrew Bailey and the FCA should not allow the LCF probe to fester. Nor should they be put off by the fact that the Serious Fraud office is involved and some arrests have already been made. Such precautions are often necessary as those involved often have the wherewithal to move to jurisdictions beyond justice.
The issues surrounding LCF’s failure are plain. Investors could be forgiven for thinking that the high-return mini-bonds were safe. The name ‘bond’ itself implies secure, although veterans of the ‘spits’ bond crisis of the early noughties will know better.
Moreover, there may have been an impression that the mini-bonds were regulated from allegedly misleading stuff on the website. There also are questions to be answered as to whether the auditors at Ernst & Young and PwC were asleep at the wheel.
Clearly apportioning blame is important. The more harsh amongst us will think that caveat emptor (buyer beware) should apply to investment products. In the current digital environment, all manner of scammers, some posing as HMRC, are on the loose and it can be hard to separate honest communications from those which are not. At the very least unauthorised groups such as LCF should be required to put heavy red warning signs on the first of their web pages and across all documents.
The big question for those who have been bled dry is will they ever get their money back? The early answer from the administrators is that the best that can be hoped for is 20p in the pound. That is an outcome that should be not be taken lying down.
LCF mini-bond holders need to organise an action group and seek redress by direct political and judicial action.
Campaigns for compensation can take years as Equitable Life policyholders and investors in Barlow Clowes, an unregulated bond scandal from the 1990s, found.
The fight is worth it. depositors in the UK-arm of BCCI, also known as Bank of Crooks and Criminals, recovered most of their savings. But it took huge effort.
Steady Eddie
THE late governor of the Bank of England, Eddie George, had a very different attitude towards regulation than the current generation of enforcers.
He argued that finance ‘was a risk business’, and if there was too much consumer protection, banks would never fail.
He preferred supervision to control the animal spirits, and jail as the ultimate sanction. one has the feeling he would be quietly satisfied with sentences conferred on former Barclays Euribor interest-rate setter Colin Bermingham, who has been condemned to five years in prison, and former Barclays dealer Carlo Palombo, who received a four-year sentence after a successful SFO prosecution.
These sentences look light compared to the 14 years (reduced to 11 years) imposed on former UBS trader Tom Hayes for Libor interest-rate manipulation. Nevertheless, the sight of former City boys being whisked off to jail for relatively long stays as Her Majesty’s guests ought to have a salutary impact on those inclined to game the system.
Vote Julian
IT MAY be that the Superdry brand is unfixable and just another victim of the fast-fashion cycle. History would suggest that the brand’s creator Julian dunkerton has a better chance of putting things right than the man from the Co-op, Euan Sutherland.
Both, incidentally, should give up trying to look like their millennial customers and dress for their age. In the meantime, undecided investors should give dunkerton and his colleague James Holder, with a combined 29pc of the stock, the benefit of the doubt at today’s general meeting.
Remember comeback king Steve Jobs.