Angry investors at public meeting demand answers from FCA over financial scandals that have lost their money

The City watchdog has admitted that its rules are so complex that even its staff may not understand which investment products come under its jurisdiction.

The chairman of the Financial Conduct Authority made the concession during a tempestuous annual public meeting in London on Wednesday, where consumers criticised the regulator for failing to protect them from a growing list of scandals.

Attendees demanded answers over the collapse of London Capital & Finance, which is now at the centre of a mounting £236m financial scandal in which more than 11,000 investors lost money. The FCA’s enforcement team was warned three years ago about the company, but failed to act.

One victim claimed FCA staff assured her that dealings with LC&F were protected by the regulator. But complex regulation meant that while LC&F was authorised by the regulator, the mini-bond products it sold were not. It left investors unable to recover their cash through the Financial Services Compensation Scheme once the firm went under.

One attendee challenged the FCA to be more proactive in training staff and explaining which products and services are protected – referred to as the “regulatory perimeter”.

But the FCA’s chairman, Charles Randell, said that rules governing the regulatory perimeter are hard to understand, given how much they have changed over time. “It’s actually almost impossible to explain. There’s tremendous risk of confusion, either on the part of consumers, or … on the part of our staff. So it’s not a good situation and I’ll be the first to acknowledge that,” he added.

“For many people in this country … unregulated investment, particularly high-risk investments, have absolutely no place in their savings and retirement planning. They’re not suitable products for people, and they should go in to those products with their eyes much wider open than the perimeter enables them to be at the moment.”

Randell and the FCA’s chief executive, Andrew Bailey, were also questioned over compensation for overcharged HSBC credit card customers, allegations of misconduct at Lloyds Bank’s business support unit in Bristol, and its lack of action around Royal Bank of Scotland’s now-defunct Global Restructuring Group [GRG].

Some of the nearly 350 people present turned angry when the FCA failed to extend the meeting, which lasted two hours, inciting a shout of “you’re running away” from one.

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Last month the FCA confirmed it would not punish either RBS or any current or former RBS managers, despite finding evidence of “systemic and widespread” mistreatment of small and medium-sized business customers between 2008 and 2013. The regulator said its powers were limited as business lending is not regulated in the UK.

When asked what would constitute “criminal behaviour” in the GRG case, Bailey said the FCA introduced the senior managers’ regime in 2016, which aims to hold individuals at the bank responsible when things go wrong. He stopped short of confirming whether any crimes would have been committed under the new rules, and stressed that the regulation could not applied retroactively.