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Regular readers and those who have heard me speak know that I am often less than impressed by the way the FCA operates.  This time I am far from alone.  In July, the FCA launched an eight-week consultation proposing changes to the way in which it, the PRA and Bank of England make compensation payments to consumers in the event of their own regulatory failings.

The FCA led consultation infers that the revised scheme would ensure the complaints process was more accessible but does not explain how, and also sees the maximum amount of compensation for financial loss capped at £10,000 per case and for distress and inconvenience at £1,000.

The regulatory complaints scheme allows consumers and firms to complain about the way our regulators have acted, but the payments are often small and often only after the independent complaints commissioner gets involved.  The commissioner has been very critical of the FCA’s performance on handling complaints, particularly over the last 18 months.

As AMI was finalising its response to the consultation, campaigners Gina and Alan Miller issued an open letter to the Treasury Select Committee branding the proposals as “intellectually dishonest and morally questionable”, calling for the consultation to be suspended.  The “True and Fair Campaign” led by the Millers also criticised the eight-week timescale of the consultation which had taken place over the summer holidays and during an unprecedented pandemic.

Gina Miller is quoted as saying, “It is scandalous that the FCA is once again acting in an anti-consumer manner by attempting to disadvantage victims of their own regulatory failings.  Who could possibly have thought it sensible, after a litany of financial scandals, compounded by a global pandemic that has damaged financial services businesses and consumers alike, for the FCA to hold a consultation on its own performance in the depths of the summer holidays?”

Ms Miller called instead for the consultation to be suspended until the findings of three ongoing independent investigations into the FCA management of firm failures, namely the HBOS Reading scandal, London Capital & Finance and Connaught, were published.

As previously mentioned, the Complaints Commissioner has raised a number of concerns about staff numbers in the FCA internal complaints team, management quality, the approach to complainants and the time taken to deal with complaints.  His growing frustration with FCA senior management shines out of his most recent findings.  The consultation does nothing to explain or address these issues.  With no measures or remedies to fix these, AMI is calling for clarity on both any revised data and oversight being reported internally.  The FCA Board should be setting out details of the actions they have asked for in order to allow them to have a focussed view on how successful the remediation proposed is operating.  We are calling for clarity on Board oversight of this crucial area which is a measure of management performance.  These should benefit from transparency via open publication.

In previous years under challenge from AMI, the FCA has outlined that it has implemented the Senior Managers Regime within the organisation.  In commercial firms this means that both Senior Manager functions and Material Risk Takers can have their bonus terms impacted by poor outcomes.  AMI considers it equitable that any compensation paid by the FCA in a financial year should be deducted from any budgeted bonus pot thereby meaning firms are not paying for management failures.  This would be tangible evidence of the application of their own scheme which currently appears little more than cosmetic.

Any solutions other than suggested here will be the FCA trying to paper over the cracks of a failing organisation.  Nikhil Rathi should be stopping this in its tracks as one of his first acts.  Those who suffer even under accidental errors deserve justice and firms who have had no part should be protected.

Robert Sinclair
Chief Executive, AMI,
September 2020

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