FCA Faces Reform Calls From Lawmakers After ‘Litany of Failures’

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Britain’s financial markets regulator is under pressure from a U.K. parliamentary committee to overhaul its operations after failing to stop a scandal that exposed consumers to hundreds of millions of pounds in losses.

The Treasury Committee concluded that the Financial Conduct Authority must set key milestones to transform its culture and system of overseeing firms. Senior executives should have more accountability for their work, and the FCA shouldn’t overly rely on collective responsibility, the committee said.

The report follows a review into the FCA’s oversight of London Capital & Finance Plc, which collapsed in a mini-bond scandal exposing retail investors to losses on more than $300 million in investments. Elizabeth Gloster, a former judge who compiled a 494-page report into the matter, found a sluggish investigative culture at the FCA with inadequate training of staff to root out fraud.

“The collapse of LCF is one of the largest conduct regulatory failures in decades,” Mel Stride, chair of parliament’s Treasury Committee, said in a statement. “Dame Elizabeth Gloster identified a litany of failings at the FCA.”

The committee concluded that Bank of England Governor Andrew Bailey, who led the FCA during the period, didn’t mislead lawmakers in describing his interactions with Gloster. The pair clashed publicly, and Bailey repeatedly expressed anger at how he was portrayed in Gloster’s report and the debate his lawyer had with the former judge over the definition of “culpability” and “responsibility” and how blame should be ascribed.

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