Call-Out for Views: Regulators' Complaints Consultation
by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting
The Complaints Commissioner has just critiqued City watchdogs for running a truncated eight-week consultation that caps payments for financial loss at £10,000 where regulators’ failings were the ‘sole or primary cause’ of the loss.
Anthony Townsend, the Complaints Commissioner, said the proposals “represent an explicit fettering of compensation for direct financial loss.”
Andy Agathangelou, Transparency Task Force Founder, has organised a special Symposium on this issue on 2nd September, prior to the consultation deadline on September 14th. He says: “This issue is of great concern to TTF because we want to do all we can to help protect consumers’ interests, hence our symposium and of course we’ll also be responding to the consultation itself.”
The Bank of England, Financial Conduct Authority and Prudential Regulation Authority launched their consultation last month following Mel Stride MP’s criticism of substantial complaints-handling delays at the FCA.
As James Hurley reported in the Times today, the FCA is ‘the subject of almost all the complaints’. It is immune from being sued for damages in most cases, but the Complaints Commissioner was established in 2000 as a means by which individuals and firms can complain and seek redress for FCA failings.
Gina Miller, co-founder of the True and Fair Campaign, is one of those who will be speaking at our September 2nd symposium. She has called for the consultation to be paused pending the findings of reviews into the FCA’s alleged mishandling of three scandals: the sale of interest rate swaps to small and medium-sized companies, the collapse of London, Capital & Finance and of Connaught Income Fund Series 1.
Mark Bishop, of the Connaught Action Group, sits on TTF’s Advisory Board and will also be speaking at our event on September 2nd. He told the Times that he believes the three ongoing reviews of the scandals will conclude there were ‘serious regulatory failings’ and that: “A truncated consultation on plans to restrict the rights of the public, held over the summer holidays, and during a pandemic, looks a desperate, crudely executed attempt to protect itself”.
What does the consultation cover?
The Bank of England, Prudential Regulation Authority and Financial Conduct Authority consultation, aside from imposing a £10,000 cap for financial loss in most cases, also includes details of payments for ‘distress’ without financial loss. A complainant experiencing ‘a very high level of distress or inconvenience’, as a result of a ‘major failure’ in FCA processes would fall into the highest band for ‘distress’ – which is £500-£1000.
The compensation for financial loss, meanwhile, would be capped at £10,000, except in ‘exceptional circumstances’ – it is not stated in the document how ‘exceptional’ circumstances would be defined.
The regulators write: “The mere fact that one of us may have been at fault in some way does not mean that the Regulator should be considered to be the sole or primary cause of loss which was the result of the actions of a financial services firm”.
Annex 2 of the consultation discloses the full Draft Complaints Scheme Document and shows what categories of complaint the watchdogs probe.
- a. mistake;
- b. lack of care;
- c. unreasonable delay;
- d. unprofessional behaviour;
- e. bias;
- f. lack of integrity.
“Our investigations are desk-based and we do not interview witnesses or complainants.”
Who can respond to the consultation?
“This consultation may be of interest to anyone who is a potential or actual complainant under the Scheme. This includes regulated businesses and consumers of financial services.
“It may also interest consumer advocates and action groups, trade associations, and politicians, among others.”
The consultation centres on these five questions:
“Q1:Do you agree the language in Annex 2 is more accessible than the language of the current Scheme? Will the Scheme as proposed achieve the objectives set out in paragraph 3.3?”*
*”3.3The benefits of making the Scheme more accessible include:• it being less time-consuming for complainants to work out how to use the Scheme;• more complainants having realistic expectations of what the Scheme can do for them; and• we and the Complaints Commissioner needing to spend less time explaining the Scheme and dispelling misunderstandings.”
“Q2:Do you have any comments on our approach to ex-gratia compensatory payments for distress or inconvenience?
Q3:Do you have any comments on our approach to ex-gratia compensatory payments in respect of financial loss?
Q4:Do you agree with our proposals for implementing the new Scheme?
Q5:What impact do you think our proposals in this consultation paper will have on persons who share protected characteristics?”
Interested groups or individuals have a deadline of 14th September to respond to the list of questions in the Consultation document.
Transparency Task Force Interviews Scam Victims
We are interviewing one pension scam victim today, with more to follow as we continue our preparation for MPs’ Inquiry on Pension Scams in September.
As I previously reported on this blog, we have already had a fascinating interview with Mark Bishop that covered alleged failings by regulators – highly relevant to the consultation above. Mark advocates for almost two thousand sophisticated investors like himself who lost, collectively, more than £100M in 2012 – largely from their pension funds – in an alleged fraud, with the failure to prevent it since blamed in part on inadequate due diligence by Capita Financial Managers.
At least one member of the Connaught Action Group sadly died without receiving any resolution to his case. Mark explained that the complainant had terminal cancer and “would beg me to get the matter resolved rapidly because he was leaving behind a daughter who had a disabled son, she was a single parent. Unfortunately, perhaps because the regulator didn’t move as well or as efficiently as it might have done, I was unable to deliver on any undertakings I might have given to him to achieve that. That was quite painful.”
“I’ve dealt with a number of people as well including a whistleblower, whose career was ruined by this case.”
The FCA has been heavily criticised by Connaught investors for an apparent lack of vigilance and refusal of Chief Executives to engage directly with Mark Bishop when he was advocating for complainants. The Connaught Income Fund Series 1 case is one of the three cases currently under independent review.
“When I first became aware of concerns in late June , I phoned what was then the FSA” Mark told us. “I said ‘I’d like to speak to somebody who was involved in this product, I believe that there may be some misconduct’.
“I found the individual, she refused to meet with me, she refused to receive evidence from me, she refused to send herself or a colleague to a meeting of [our] investigative team.”
Mark Bishop came to the view, based on that and subsequent experiences, that the watchdog needs to be reformed like Trigger’s broom in Only Fools and Horses (watch clip): “This old broom has had 70 new heads and 40 new handles …” “Well how the hell can it be the same bloody broom?” …
I asked Mark what he feels needs to be done to protect consumers and investors?
“To me it’s about fixing the organisation rather than what you call it,” he said “this thing could become still the FCA, but actually a fit for purpose regulator. I think to do that you would actually have to change the institutional culture of it very substantially.”
“Currently at the moment it talks about being a principle based regulator, but when principles are breached, very little tends to happen. It’s the lead prosecutor for a number of criminal offences. Very rarely is anybody prosecuted for those. I think really it’s about changing the culture and the people in order to turn it into a much more proactive organisation that really has at its heart, in reality not just in rhetoric, the need to protect consumers.”
Press Timeline of relevant articles:
24 Aug 2020 – Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times
04 Aug 2020 – Have your say: Will the WPC’s inquiry into the impact of pension freedoms be too overshadowed by Covid-19 impacts? by Professional Pensions
03 Aug 2020 – ‘“I’m 39, have lost my job and am in debt – can I unlock my £18k pension?” … DON’T do it!’‘ by Steve Webb for This is Money
01 Aug 2020 – ‘I lost £2.3m after I was conned into transferring my pension’ by Jessica Beard for the Telegraph
31 Jul 2020 ‘Common sense’ prevails as pension freedom withdrawals fall 17% — But drop is expected to be ‘a short-term blip’ by Robbie Lawther for International Adviser
31 Jul 2020 – HMRC figures show plunging pension freedom withdrawals by Hope William-Smith for Professional Adviser
28 Jul 2020 – MPs launch inquiry into pension scams by Tom Kelly for Daily Mail ; UK Pension Scams Under Scrutiny After 2015 Relaxation in Rules by Reuters & MPs launch wide-ranging pension scams probe by Justin Cash for MoneyMarketing
24 Jul 2020 – US business groups seek steps to stamp out online fraud by Leonie Barrie for Just Style
22 Jul 2020 – Pension scams increase amid lockdown by Sophie Smith for Pensions Age & Missed Opportunity to Use Victims in Scam Work by Amy Austin for FT Adviser
20 Jul 2020 Campaigners Aim to Create Pension Scam Database by Michael Klimes & Government eyes unauthorised firms by Justin Cash for MoneyMarketing
29 Jun 2020 – MPs Pushed to Launch Pension Scam Inquiry by Amy Austin for FT Adviser & Lawmakers Urged To Open Inquiry Into Pension Scams by Martin Croucher for Law 360
11 May 2020 – FCA urged to build public trust in independent reviews by Rachel Mortimer for FT Adviser
20 Mar 2020 – Connaught review delayed as Covid-19 concerns loom by Rachel Mortimer in FT Adviser
29 Dec 2019 – ‘Lambs to the slaughter – tens of thousands of savers have lost up to £10billion in rogue pensions schemes sanctioned by the government… and now the taxman is threatening VICTIMS with fines’, by Tom Kelly for the Daily Mail
15 Aug 2019 – Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail
20 Jun 2019 – FCA orders review of its handling of Connaught collapse by Rachel Mortimer for FT Adviser