Financial Conduct Authority is failing due to poor culture – Carmichael

Orkney and Shetland MP, Alistair Carmichael, has today led a parliamentary debate on the accountability of the Financial Conduct Authority (FCA), calling for greater pressure to improve the culture of the government body, which regulates financial services in the UK.

Mr Carmichael spoke about his concerns regarding the FCA’s inaction during the Midas fraud in the north of Scotland, and drew parallels with the Post Office Horizon scandal around the need for accountability from public bodies to avoid future scandals. He highlighted a range of concerns from constituents, Unite the union, NGO Spotlight on Corruption and journalists about the operation of the FCA.

Last week Mr Carmichael held a showing of the documentary “King of the Swindlers” by BBC Scotland in the House of Commons, attended by MPs, journalists and victims of the fraud led by Alistair Greig. The documentary explains the events of the Midas Scandal, focusing on one of Scotland’s most infamous investment fraudsters, Alistair Greig. Greig’s fraudulent activities led to a £13 million theft from his victims, and went undetected by the Financial Conduct Authority for several years.

Speaking during the debate, Mr Carmichael said:

“On no fewer than three occasions, the FCA, or the Financial Services Authority as it was initially, failed to read the warning signs and take action. As a consequence, that was allowed to continue. Had it acted at the first available opportunity, there would have been only one victim of Alistair Greig, rather than hundreds.

“The parallels with the Post Office are unavoidable. It is the same situation time and again: a well-resourced public body decides to deny, deny, deny until eventually people have to give in. That worked for the Post Office, although we were able to break through it. That is just one of the most egregious examples. Lower down the food chain, where fewer people are affected, including my constituents, it is much more difficult for anybody to get justice.

“That is how I became interested in the first place. As is often the case, when one starts to lift rocks, what is underneath takes one off in other directions. I am afraid that I have found little under any rock that I have lifted to make me think there is anything in the FCA at the moment about which we should be happy or optimistic.

“It is apparent to me that the poor culture in the FCA is driven from the top and then bleeds into every aspect of its work. However, we all remember why we have it and why it was set up. For the national economic interest of us all, it is too important to fail, but surely it is apparent that it is failing, and somebody needs to take control and change that.”

Responding to the debate, Economic Secretary to the Treasury Bim Afolami MP said:

“There is more work that we can do to streamline the process of accountability to ensure that it is rock solid and firm, and focused on not just consumer outcomes but ensuring the market works. I think there is accountability, but we need to find ways to ensure that it is streamlined and more focused. 

“I hope I have reassured the right hon. Member for Orkney and Shetland that the Government take holding the FCA to account very seriously. The legislative framework is designed to strike the right balance between the independence of the regulators and ensuring that they are held properly accountable. This House will be able to judge the FCA’s progress through things such as the upcoming report on how it has advanced its new secondary growth and competitiveness objective since it came into effect last year, and whether it takes account of the view of this House and the Chancellor on its naming and shaming proposals.”