Written by The All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services has released its comprehensive Call for Evidence Report, delivering a scathing critique of the Financial Conduct Authority (FCA). The 380-page document, drawing on testimony from 174 individuals—whistleblowers, victims of financial misconduct, and former FCA employees—lays bare the FCA’s entrenched cultural dysfunction, regulatory inertia, and failures in consumer protection.
Representing years of investigation and analysis, the report raises fundamental questions about the FCA’s capacity to fulfil its statutory obligations. With financial services contributing 8.3% of the UK’s GDP and acting as a cornerstone of national economic stability, the regulator’s inefficacies pose a significant systemic risk.
Access the full APPG report here.
Key Findings: A Regulator in Crisis
The APPG report meticulously dissects the FCA’s failures, grouping them into thematic issues that highlight systemic weaknesses in culture, operational focus, and accountability.
1. A Toxic Internal Culture
The FCA’s organisational culture is described as hostile, unaccountable, and resistant to change. Current and former employees testify to a leadership structure that stifles dissent and marginalises whistleblowers. Several employees reported bullying and retaliation, with one characterising the atmosphere as “dictatorial” (Section G, pp. 218-255).
The report underscores the FCA’s systemic mishandling of whistleblowers. Those attempting to expose misconduct are often ignored or actively undermined, undermining public trust and perpetuating a cycle of unaddressed wrongdoing (p. 256). Testimony paints a picture of whistleblowers dismissed as troublemakers, a culture that significantly undermines the regulator’s mandate.
2. Regulatory Capture and Bias
A persistent theme in the report is the perception that the FCA is too aligned with the interests of large financial institutions. Regulatory capture—a condition where oversight bodies operate more for the benefit of the entities they regulate than for the public good—is identified as a core issue (pp. 135-179).
Case studies like the Connaught Income Fund and London Capital & Finance (LCF) collapses highlight failures in identifying fraud despite clear warning signs. Testimony from SMEs further emphasises that the FCA tends to side with powerful financial firms while offering little protection or recourse to smaller entities and individuals.
3. Consumer Protection Failures
The FCA’s handling of consumer protection is one of its most damning shortcomings. Pension and investment scam victims reported that the FCA failed to act despite multiple red flags (pp. 26-27). Many believed that FCA-authorised firms provided a safety net, only to suffer devastating financial losses.
Victims frequently described the FCA’s approach as “frustrating” and “unresponsive.” One victim noted, “The FCA acts too little, too late, and even then, with no real accountability for the perpetrators.”
Transformation Programme: More Hype than Substance?
The FCA’s ongoing Transformation Programme, launched with a £320 million budget, has been criticised for delivering superficial changes while leaving systemic issues unaddressed. Testimonies reflect widespread scepticism about the programme’s sincerity, with one whistleblower describing it as “window dressing for a fundamentally broken organisation” (p. 11).
While the FCA claims progress in addressing these issues, new scandals involving WealthTek, Woodford, and debanking suggest otherwise. These failures highlight the FCA’s inability to adequately detect, investigate, and prevent misconduct, even under its purportedly reformed operational structure (pp. 5-6).
The Human Toll: Victims Speak Out
The APPG report vividly captures the emotional and financial devastation wrought by regulatory failures. Victims of pension scams shared harrowing accounts of their savings being wiped out, leaving them struggling to recover. One retiree described having to sell their home, while another spoke of the impact on their mental health, citing depression and anxiety.
This testimony underscores the broader societal consequences of regulatory inaction, with families, small businesses, and communities bearing the brunt of the FCA’s shortcomings (p. 27).
Recommendations for Reform
The APPG report offers a comprehensive blueprint for reform, addressing both the FCA’s internal culture and its structural inefficiencies. Key recommendations include:
- Independent Oversight: Establishing a Financial Regulators’ Supervisory Council to periodically review the FCA’s performance and hold it accountable (p. 12).
- Legal Accountability: Removing the FCA’s immunity from civil liability, enabling consumers to pursue redress for regulatory failures (p. 13).
- Whistleblower Protections: Strengthening legal protections to ensure whistleblowers can report misconduct without fear of retaliation (p. 256).
- Cultural Reforms: Mandating a consumer-centric mission statement and aligning staff incentives with regulatory objectives (p. 12).
- Redistribution of Responsibilities: Exploring the transfer of some FCA functions to other agencies if meaningful reform cannot be achieved (p. 13).
- Royal Commission: If internal reforms fail, initiating a Royal Commission to examine and potentially overhaul the UK’s regulatory framework (p. 13).
The Path Forward: A Pivotal Moment for Reform
As the UK seeks to position itself as a global leader in digital finance and cryptocurrency, the FCA’s deficiencies represent a significant barrier to progress. The APPG warns that the regulator’s inability to adapt and respond to emerging challenges undermines both market confidence and the broader financial system.
The APPG’s findings are a wake-up call for Parliament, the government, and the FCA. Without bold action, the FCA risks irrelevance, and the UK’s financial sector risks losing its global standing.
Conclusion: Reform or Rebuild?
The APPG’s Call for Evidence Report is a stark indictment of a regulator failing to meet its most basic obligations. The FCA’s issues are not just operational but deeply cultural, requiring immediate and far-reaching reforms.
Parliament must act decisively to implement the report’s recommendations, ensuring the FCA evolves into an organisation that prioritises consumer protection and upholds public trust. Anything less risks perpetuating the cycle of regulatory failure and eroding confidence in the UK’s financial markets.
Disclaimer: This article is based on the APPG’s Call for Evidence Report, available here. Readers are encouraged to consult the full report for further details.