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

Peter Grant Excerpts

2nd reading
Tuesday 8th June 2021 Commons Chamber

[Peter Grant (Glenrothes) (SNP) [V]]

I am pleased to be able to speak in this short debate and to confirm that the SNP will not oppose Second Reading, but I am angry and frustrated that the debate needs to take place at all. Most parts of the legislation are only necessary because of a catalogue of failures of Government, of legislation and of regulators.

I will speak first about the second of the two parts, on the Pension Protection Fund. One of the first times I spoke in Parliament, just a few days after my maiden speech, I expressed concerns about pension liberation scams. I asked the then Secretary of State what steps the Government were taking to protect people from them, to make sure changing the rules would not just make open season for the scammers. We now know that the answer to that question is that the Government were doing nothing, or if they were doing anything, they did not do nearly enough. Some £350 million has been stolen from people’s pensions using these scams. Those pensioners should be compensated from the Pension Protection Fund, and I would support a provision in clause 2 to allow that to happen.

Clause 1 sets up the promised compensation scheme for victims of the London Capital & Finance scandal. About 11,000 people were affected, of whom 2,000 got some compensation and 9,000 got nothing. I do not think any of the 11,000 understand why some qualified for compensation and some did not. It is very welcome that the Bill will provide some redress for the 9,000 or so bondholders who would have otherwise got nothing. It is welcome, but it is not enough.

The House of Commons Library has described the Government’s decision to set up the compensation scheme as “a somewhat exceptional response.” The response is exceptional, but the scandal to which it responds is anything but. It is the latest, and sadly almost certainly not the last, in a roll of shame that includes Equitable Life, Premier FX, Connaught, Henley pensions, Blackmore Bond and many others. The victims of some of these schemes get compensation, but tens of thousands get nothing.

Blackmore Bond, for example, went into administration in May 2020 and its bondholders are unlikely to see any of the £46 million investment that the company’s directors had promised them was safe and guaranteed. One of my constituents lost his £40,000 life savings to Blackmore Bond. I have to disagree with the Minister’s claim that LCF was unique or even distinctive in any material way from Blackmore Bond and various other mini-bond failures. LCF hid behind its own FCA registration knowing that it had nothing to do with the products it was selling. Blackmore Bond hid behind the FCA registration of other companies that acted as its representatives. The intention in all cases was clear: to mislead investors as to the degree of protection that the Financial Conduct Authority would give them, when in most cases the companies knew that the FCA would give no protection whatever.

Like LCF, Blackmore Bond could have been stopped much sooner if the Financial Conduct Authority had acted on the warnings it was receiving as long ago as early 2017. One came from an eyewitness who offered to let the FCA into his office to watch and listen at first hand to the “unlawful” telephone sales practices that the company’s representatives, Amyma Ltd, were using—his words, not mine. It took two and a half years for the FCA to remove Amyma’s right to act as authorised representatives. Several months later, again as part of its response to the collapse of LCF, the FCA banned the sale of mini-bonds to small retail investors. Some £26 million of the total investor losses in Blackmore Bond were from bonds sold after March 2017—after the Financial Conduct Authority had enough information to take decisive action, but before it had taken the action that was needed.

I want to see legislation, or possibly even an amendment to this Bill, that makes schemes similar to the LCF compensation scheme available to victims of other pension and investment scams without them having to wait for a public inquiry and a new Act of Parliament for every single one. I want to see the Government getting serious about dealing with the shysters and charlatans who too often seem to walk away unscathed from these scandals, or more likely get driven away in their chauffeur-driven luxury cars, leaving their victims in many cases almost destitute. I want to see a regulatory regime that works, not just to compensate the victims at public expense, but to stop the crooks and chancers from being able to con people out of their money in the first place.

The fact that the Minister admitted in his opening speech that paying compensation to all victims of pension or investment scams would place an unacceptable burden on the public finances is one of the biggest admissions of regulatory failure by any Government Minister that I can ever remember. While we welcome the steps taken in the Bill, the message very clearly from the Scottish National party, as it was from the Labour Front-Bench spokesman a few minutes ago, is that this is not even enough to be the start of the action needed to make people’s pensions and investments safe from the crooks.