At its meeting on March 28, the regulator’s board decided that there should be an investigation by an “independent person” into the issues raised by the failure of LCF, which slumped into administration in January with 14,000 bondholders with holdings totalling £236m.
Last month the Serious Fraud Office revealed there had been four arrests in connection with the firm’s collapse.
The FCA says the investigation should cover questions in two areas:
• whether the existing regulatory system adequately protects retail purchasers of mini-bonds from unacceptable levels of harm; and
• the FCA’s supervision of LCF.
The board decided that the FCA should ask the Treasury to use its formal powers to direct the FCA to commission this review, as this will ensure that the review has a broad and comprehensive remit.
FCA Chair Charles Randell wrote to the Economic Secretary to the Treasury, John Glen MP, to inform him of the request, and the Economic Secretary agreed that such a direction should be given.
Information about the detailed terms of reference of the review and identity of the independent reviewer is yet to be released.