Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Mel Stride Excerpts

2nd reading
Tuesday 8th June 2021 Commons Chamber

[Mel Stride (Central Devon) (Con) [V]]

This is a very important Bill. It seeks to compensate for some significant wrongs. As part of our ongoing inquiry into London Capital & Finance and the FCA’s response to it, the Treasury Committee has heard many harrowing stories of those who, in many cases, lost life-changing amounts of money as a consequence of what happened.

The Treasury Committee has been involved in the LCF situation for some time. My predecessor, Baroness Morgan, initiated the inquiry by Dame Elizabeth Gloster through approaches by the Committee to the Treasury and the FCA. I take this opportunity to offer my thanks, on behalf of the Committee and of the LCF bond holders, for the very thorough report that she and her team produced, for the witness session she attended as part of our inquiry and for the courtesy and information that she provided to me outside that witness session by way of correspondence and discussions over the telephone.

Dame Elizabeth Gloster carried out some excellent work. As a consequence of her report, the level of the failings on the part of the FCA is very clear. Indeed, the answers to the key questions put by the Government to Dame Elizabeth as part of the directions for her inquiry were clear: the permissions granted to LCF were not appropriate to the business it carried on; the FCA did not adequately supervise LCF’s compliance with the FCA rules and policies; and the FCA’s handling of information from third parties regarding LCF was wholly deficient. The FCA had appropriate rules to regulate the communication of financial promotions by LCF. However, the FCA did not have in place appropriate policies. Numerous red flags were examined by the Committee, but they had been missed over a long period.

There were wider failings within the regulatory system, and we have heard some of those from the shadow Minister, the right hon. Member for Wolverhampton South East (Mr McFadden). The FCA’s approach to the perimeter was limited. It did not take a holistic view of the perimeter and therefore there was inadequate supervision of unregulated activities. The halo effect, which the shadow Minister also raised, was without doubt a wider systemic problem within the FCA.

Our inquiry is ongoing. We have taken evidence from Dame Elizabeth, from senior personnel at the FCA, including Andrew Bailey, who was the chief executive officer of the FCA during the appropriate period, and my hon. Friend the Economic Secretary to the Treasury. We will have much to say in our report, which will be published no later than the end of this month.

Looking ahead, the speakers so far have rightly asked how we make sure that this does not happen again. That lies within the transformation programme that the FCA is now undertaking. The Committee will be showing a close and careful interest in the progress of that transformation programme.

By way of intervention, I note the observation of my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) about the importance of those responsible for shortcomings being held accountable. We will no doubt have something to say about that in the report.

The whole issue of compensation leads on to the issue of the general view that there should be personal responsibility for investments, as well as Government backing, and we will need to look at that. I am terribly short of time, so I will leave it there. I welcome the Bill.

[Madam Deputy Speaker (Dame Rosie Winterton)]

We now go to the SNP spokesperson, Peter Grant, who I am sure will be acutely aware of the very limited amount of time that we have left for the debate.