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Financial Services Update

My honourable friend the Economic Secretary to the Treasury (John Glen) has today made the following Written Ministerial Statement.

On 23 May 2019, I laid a direction before Parliament using the powers conferred by sections 77(1) and (2) and 78(5) and (6) of the Financial Services Act 2012 (“the Act”) and set this out in a Written Ministerial Statement (HCWS1584). I formally directed the Financial Conduct Authority (“the FCA”) to launch an independent investigation into the events relating to the regulation of London Capital & Finance plc (“LCF”). Paragraph 3 of the direction required that the investigation focus on whether the FCA discharged its functions properly (“in a manner which enabled it to effectively fulfil its statutory objectives”) and with a particular focus on matters listed in the direction. The direction required that the FCA appoint an independent person to undertake the review and that the review should be completed within one year. The FCA appointed Dame Elizabeth Gloster, who has had a distinguished career as a barrister and as a judge on the High Court and the Court of Appeal, to lead the investigation. I also approved this appointment.

The direction also set out that if the Investigator considered that it would not be possible to complete the investigation within one year the FCA must inform the Treasury of the reasons for the delay and set a revised target date for its conclusion. The FCA wrote to me in May setting out that the delivery of the report would have to be delayed to 30 September 2020, and again in August setting out that the target date for conclusion would have to be delayed to the 23 November 2020, which reflected capacity constraints as a result of Covid and delays in the FCA providing key documents to Dame Elizabeth. I also received correspondence from Dame Elizabeth on both occasions. Further information can be found on the government website (https://www.gov.uk/government/collections/independent-investigation-into-the-failure-of-london-capital-and-finance ).

On 23 November 2020, Dame Elizabeth, in accordance with the revised timeline, delivered her final written report to the FCA. In line with the direction, the FCA will now consider the report, the recommendations and any lessons learnt. Section 82 of the Act requires the Government to lay before Parliament the FCA’s written response to the investigation which will include the investigator’s findings and recommendations.

I recognise that it continues to be a very difficult and uncertain time for all LCF bondholders. I can confirm today that I have asked the FCA to work with the Treasury so that the government can lay before Parliament (and publish online) Dame Elizabeth’s report and the FCA’s response before the December recess. This independent investigation is separate to criminal and regulatory investigations into the failure of LCF by the Serious Fraud Office (SFO) and FCA which are still ongoing.