The regulator is opaque, unaccountable, and “widely seen as incompetent.”

A report due to be revealed in parliament on Tuesday [26 November 2024] claims the city regulator is opaque, unaccountable, and “widely seen as incompetent.

A study of views on the Financial Conduct Authority [FCA], which includes the opinions of some current and former staff, is due to report claims that:-

• The organisation has a “defective culture”,
• Is too close to those it regulates and is “slow to act and
• Even slower to admit it has got things wrong”.

The 359-page report, which is also based on interviews with whistleblowers and victims of financial scandals, includes:-

• Allegations that errors and inaction are too common at the authority and
• Claims that staff who challenge the “official line” are “bullied, discriminated against or managed out”.

The report from the all-party parliamentary group on investment fraud and fairer financial services said some consumers believed the FCA was.

• “Culturally and economically aligned with banks and other large, authorised firms and hence disinclined to act against their interests”.

“Transformation programme”

• A £320 million “transformation programme” at the FCA is being led by Nikhil Rathi, chief executive, following a series of scandals.
• Its mishandling of the London Capital & Finance Ponzi scheme cost about 11,600 investors more than £237 million.
• The National Audit Office has said the authority is “carrying out significant work to reshape the organisation”.
• However, specific staff told the parliamentary group’s survey that the programme is “not working” and that some see it as “more about reducing costs than protecting the consumer”.
• Existing and former staff also raised concerns about the quality of some of their colleagues, allegedly poor management, and purported resistance to change.

FCA CULTURE

• The review describes an employee as claiming that senior managers are.
• “Entirely unresponsive” to severe concerns being raised and “the culture is simply that you are expected not to deviate from the message”.
• One former staff member quoted in the review claimed the
• “Leadership and organisation culture … has been appalling, especially the culture of inaction perpetuated by the middle management” and
• That the culture “can be summed up in the phrase, ‘I have done nothing; therefore, I have done nothing wrong’.”
• Another claimed.
• It had the “worst staff culture” she had experienced in a 40-year career.

An FCA spokeswoman said:

• “We sympathise with those who have lost out due to wrongdoing in financial services. However, we strongly reject the organisation's characterisation.
• We have learnt from historic issues and transformed as an organisation to deliver for consumers, the market, and the broader economy.”

The parliamentary group’s review.

• The parliamentary group’s review is based on views gathered from interviews with 175 respondents.
• Its secretariat is provided by Transparency Task Force, a consumer group that has previously been highly critical of the regulator’s handling of several issues.
• In his foreword to the report, Bob Blackman, co-chairman of the parliamentary group, said the testimony suggests.
• The FCA “comes across as an opaque and unaccountable organisation, slow to act and even slower to admit it has got things wrong and to change.
• The individuals who generously shared their experiences with us told tragic tales of regulatory failure causing enormous financial and emotional distress.”
• Blackman said current and former employees depict its culture and leadership as “profoundly defective”.

The FCA

• The FCA’s surveys have found that more than three-quarters of regulated firms report high satisfaction with the authority. At the same time, 85 per cent of stakeholders, such as consumer groups and politicians, say the FCA achieves its objective of protecting consumers.
• The FCA says its trust index score from its internal employee survey this year is up by 3 per cent to 64 per cent compared with 2023 and from a low of 48 per cent in 2022.
• Staff reported widespread satisfaction with the regulator’s work environment and processes, career and development and wellbeing.
• On transparency, the FCA noted it had provided oral evidence to parliamentary committees 38 times in the last parliament, more than any other regulator.

The parliamentary group’s report proposes.

• Reforms, including developing a “consumer-centric mission statement” against which the organisation is tested and held accountable by a new consumer oversight body.
• It also recommended more significant restrictions on the “revolving door” of appointments between the regulator and the financial industry.

Rachel Reeves, the chancellor, has ordered the regulator to encourage more risk-taking across the City, raising concerns that the government is in danger of weakening consumer protections.

Source

https://www.thetimes.com/article/85e636e7-1a04-4ee9-bb80-621cfdeb850d?shareToken=8a5718f9f2e6ffb7715e695262339daf