In a scathing indictment of Britain’s financial sector watchdog, an all-party parliamentary group has labeled the Financial Conduct Authority (FCA) as “incompetent at best, dishonest at worst.” The damning report, which took nearly three years to compile and drew evidence from 175 fraud victims, whistleblowers, and former FCA staff, has called for a radical shake-up of the beleaguered regulator in the wake of a series of financial scandals.
Regulatory Failures and Consumer Distress
According to Bob Blackman, co-chair of the all-party parliamentary group on investment fraud and fairer financial services, the FCA has been accused of “doing too little too late – or nothing” to prevent or punish alleged wrongdoing in scandals where financial services firms mistreated consumers and small businesses. The report paints a grim picture, with the FCA being seen as slow, inadequate, and its leaders opaque and unaccountable.
The findings underscore the urgent need for reform, as financial crime continues to be a massive problem in the UK. Blackman emphasized the vital importance of the watchdog delivering on its objective to provide consumer protection, noting that the group had heard “tragic tales of regulatory failure causing enormous financial and emotional distress.”
A Culture of Toxicity and Bullying
Some of the most compelling evidence came from current and former employees of the regulator, who depicted its culture and leadership as profoundly defective from the top down. The report highlighted that the culture has deteriorated in recent years, with errors and inaction becoming too common, little accountability, and those who challenge the official line facing bullying, discrimination, or even being managed out.
It was the worst staff culture I have ever experienced in nearly 40 years. Top-down hierarchical management, Do as you’re told, don’t argue. An astonishing arrogance that FCA ‘insiders’ know more than any newcomers.
– Former FCA employee
Whistleblowers fared no better, with the report calling the watchdog’s treatment of them and their evidence “alarming.” The FCA failed to investigate properly, act on intelligence provided, and protect – and in some cases, actively harmed – those who came forward with information.
Transformation Efforts Fall Short
Despite a transformation programme carried out by the FCA under chief executive Nikhil Rathi, who joined from the London Stock Exchange in 2020, those questioned by the APPG said with near unanimity that it has not worked. Rathi had invested heavily in technology and scrapped bonuses for senior staff after criticism of the FCA’s handling of scandals such as the London Capital & Finance investment debacle and the mis-selling of pension advice to former British Steelworkers.
Calls for Radical Reform
The report put forth several recommendations for overhauling the troubled regulator:
- Establishing a supervisory council, similar to that created in Australia
- Changing the way the FCA is funded
- Removing the FCA’s immunity from civil liability to consumers
- Installing a new leadership team, if necessary
If these reforms prove ineffective, the report suggested an Australia-style royal commission to explore a more radical restructuring of financial regulation, potentially handing some of the FCA’s powers to other organisations.
FCA Rejects Characterization, Cites Improvements
In response to the scathing report, an FCA spokesperson expressed sympathy for those who have lost out due to wrongdoing in financial services but strongly rejected the characterization of the organisation. The spokesperson stated that the FCA has learned from past issues, transformed as an organisation, and can now deliver for consumers, the market, and the wider economy.
The regulator pointed to its latest employee survey, which showed an improving picture, with trust and engagement scores rising. In the last financial year, the FCA charged 21 individuals with financial crime offenses, the highest number in a single year.
As pressure mounts on the UK’s main financial regulator, the calls for a significant overhaul grow louder. The scathing report by MPs and Lords has laid bare the deep-rooted issues plaguing the FCA, from its allegedly toxic culture to its failure to protect consumers and whistleblowers. With financial crime remaining a massive problem in the UK, the urgency for reform has never been greater. The question now is whether the FCA can rise to the challenge and transform itself into a regulator fit for purpose, or if more drastic measures will be needed to restore trust and effectiveness in the country’s financial sector watchdog.
