Private Eye’s ‘Fundamentally Supine Authority’ morphed into the ‘Fundamentally Complicit Authority’ a decade ago. The satirical magazine’s longstanding disdain for the City’s principal regulator predates the 2008 crash and did not diminish after a 2013 rebrand.
The tenor of Private Eye’s fortnightly broadsides is echoed by a scathing report last week from a parliamentary group of MPs and peers. Drawing on evidence from 175 fraud victims, whistleblowers and former staff, they describe the Financial Conduct Authority as ‘incompetent at best and dishonest at worst’. A £320m ‘transformation programme’ under Nikhil Rathi, who joined as chief executive from the London Stock Exchange in 2020, is perceived to have failed.
The report cannot simply be dismissed as the ‘usual suspects’ airing ancient grievances. One senior City figure to have endorsed it is Charles Kuhn, partner and financial crime specialist at Clyde & Co.
Kuhn, who used to work in the FCA’s Enforcement and Financial Crime Division, is among those calling for ‘urgent reform’. As he points out, the report is ‘not a good look’ for the UK and risks further undermining London’s position as a financial centre.
So what needs to be done? At root, Kuhn tells me, the FCA needs a much better understanding of its own industry, allowing the watchdog to identify ‘real risks’ and action points. He says better recruitment would go a long way toward achieving this. There are, for example, too many lawyers at the FCA who have never worked in the financial services sector. ‘Paradoxically, and only with the right talent on board, FCA powers to prosecute more criminal cases should be increased – rather than handing over to the Serious Fraud Office, which has even less industry experience,’ he adds.
Kuhn also wants to see proper protections for whistleblowers and clearer regulations on who is actually regulated by the FCA. The appointed representative regime is ‘nebulous and difficult to understand’. Investigations, meanwhile, take too long, leaving firms and individuals ‘in limbo’.
One radical suggestion in the report is that immunity from civil liability to consumers should be removed, so they can recover losses from the FCA directly. This would help remove the regulator’s ‘cloak of impregnability’. A step too far for the government, I suspect.
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