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

Rebecca Long Bailey Excerpts

2nd reading
Tuesday 8th June 2021 Commons Chamber

[Rebecca Long Bailey (Salford and Eccles) (Lab) [V]]

My constituents were not professional financial investors; most were senior citizens relying on the investment for their pension. They worked hard in their younger years to save a little bit here, a little bit there, to ensure that in their twilight years they would have enough to live on—but this security was savagely snatched away from them. They were duped by grossly misleading and deceitful marketing and let down by negligent regulators and ineffective auditors.

Although I am broadly supportive of the Bill, there are two very urgent issues that the Government must address. First, the compensation is capped at 80% of what victims would have been entitled to had they been eligible for the financial services compensation scheme. They were denied that protection simply because mini-bonds were not regulated. The Gloster report states:

“The FCA had identified the risks to consumers posed by mini-bonds from as early as 2013 and the additional risks relating to the use of mini-bonds as a quasi-investment vehicle by at least 2017.”

Yet the FCA and the Government failed to regulate. The Government must therefore recognise their own negligence to regulate, as well as the FCA’s, and commit today to offer the full compensation that victims should have been entitled to.

Secondly, on auditing, London Capital & Finance had only £50,000 of share capital and high leverage in 2016, but its auditors simply waved through its accounts. In 2018, when the firm was all but insolvent, its auditors, astoundingly, had no problem with its accounts. But sadly, as we know, this is not a rare occurrence. BHS, Carillion, Thomas Cook, Patisserie Valerie and many more all sailed through their audits with flying colours despite the horrors lurking beneath. Such scandals required robust action to ensure that they could never happen again, but this Bill does not do that. The Government must therefore set out urgent proposals to address the systemic regulatory failures that this case has exposed in the FCA but also in the auditing industry.