FCA to pay investor £22k for ‘woefully inaccurate’ register

Written by Oliver Wade
04/07/2018

The Financial Conduct Authority (FCA) has been instructed to pay an investor £22,000 because its “woefully inaccurate” register resulted in them falling victim to a scam.

The complaints commissioner heard that the investor purchased bonds from a company claiming to be a credit union in 2016 but, before doing so, checked the FCA’s register which told them that the “credit union” was authorised. However, it had turned out the firm had been dissolved in 2012, which the FCA was aware of, yet it had not updated its register because it prioritised making other updates to the list of authorised firms.

To uphold the investor’s complaint, commissioner Antony Townsend said: “Consumers have a duty to undertake their own checks to avoid scams: there are many cases of scammers using the names of properly authorised firms to dupe investors, and the FCA cannot be held responsible in such cases.

"Against that, consumers are entitled to expect that the register will be kept competently.

"This was more than a simple oversight. The record clearly shows that there was an awareness of the situation, but no effective action was taken until [the] complaint was lodged. Worse, the records which I have studied give me no confidence that the responsible departments understand the seriousness of the FCA’s failings.

“While it is understandable that the FCA should be protected from general liability for consumers’ losses, this is not an ordinary case. The FCA (and the FSA before it) for some four years sat on information which should have prompted action to remove the credit union from the register.”

Although the credit union was dissolved in 2012, in the intervening four years between then and when the investment was made, a clone firm had assumed its identity.

Upon discovering that the investment was a scam, the investor complained to the FCA, stating that they had checked the register and Financial Services Compensation Scheme (FSCS) website, they were entitled to conclude that their investment would be protected.

However, the FCA disagreed. The authority claimed that checking the register was only a single step that an investor could take to protect them self from fraud, and that the register includes a disclaimed stating that the regulator does not accept liability for any errors or omissions.

In response to the investor’s initial complaint, the FCA had apologised and offered £150 in compensation for the delay in handling the complaint.

However, writing to the investor, Townsend said “Whilst a clone firm was the principal cause of your loss, it was able to take advantage of the FCA’s woefully inaccurate register.

“I further recommend that the FCA review its internal processes to ensure that staff understand the priority which should be given to keeping the register up to date (it is clear from the papers that I have seen that some do not), and that there are protocols in place to ensure that information which suggests that a firm should cease to be authorised is acted upon promptly.”

In response, the FCA said that it had accepted Townsend’s findings and that it is currently undertaking such a review.

The regulator is already planning an overhaul of its register, which is due to commence this summer, after concerns were raised that it was not clear enough when a firm was subject to requirements such as suspensions.

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