The UK financial markets regulator, the FCA, has found itself in hot water over significant shortcomings in handling of investors’ complaints as its relevant capacity were not coping with “the volume and complexity.”
In a report published by the Complaints Commissioner Antony Townsend, the City watchdog was criticised for not expanding its complaints team that had been “inadequately resourced and put under stress.” Townsend also noted the situation had “considerably worsened” over the past year and slammed the FCA for failing to consult on improving the complaints scheme, including clarity on compensation.
The Commissioner has cited examples of shortcomings which the FCA was reluctant to admit. The regulator was also accused of ignoring recommendations concerning its complaint handling procedures, especially to clarify the policy on compensation under the scheme and those considered alongside ongoing regulatory investigations.
“Despite my repeated warnings over a sustained period – the FCA has not yet established a complaints function with the resilience required to deal with the kinds of problems which an organisation of its size and responsibilities requires,” he added.
Delays and quality problems
The commissioner flagged a number of “deficiencies” in the regulator’s handling of customers’ complaints. A stark example of this, he says, was a complaint escalated by an anonymous advisor who waited for fifteen months for his complaint to be investigated by the FCA. After repeated delays and changes of investigators, he was told that the regulator’s prob was near completion, but a few ‘important elements’ were left. A month later, the FCA had deferred a decision on the complaint for another month as the previous investigator had left, and thus the ‘important elements’ were not resolved.
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In another case, Townsend made a criticism for handling the complaint of a female investor that lost her money to an Austrian firm which turned out to be a fake clone. The original firm appeared as a ‘passported’ EU firm on the FCA’s register despite that it lost its regulatory status, and therefore should have been removed from the register 12 years ago.
The commissioner recommended that the FCA should compensate for 50% of her losses because the register error contributed in mastering the scam. However, the regulator did not agree, citing the principal cause was the fraudulent firm, and as the victim didn’t follow the FCA’s advice to make further checks with the Austrian regulator.
Although the commissioner sided with the FCA in refusing the complaint on this occasion, he expressed a wider concern that his investigation uncovered significant weaknesses in the FCA’s registration processes which its own investigation had not identified.
Although the commissioner agreed the FCA faced a big increase in complaints (205 vs 169 last year), he noted wider issues in the team including a high staff turnover. He also noted that there was a clear lack of effective supervision of newly appointed investigators between April and October 2019.
The result was that the FCA struggled both with the complaints it deferred – many of which were inappropriately ‘closed’ – and with the ‘normal’ complaints which were also subject to long delays, failures to update, and changes of investigators.