Fraud Victims and Whistleblowers Expose How the Financial Watchdog Was ‘Captured’ by Big Finance

Britain’s leading financial watchdog is facing intense criticism over its “lax” regulation of the financial services industry, amid a new report exposing how it has been “captured” by the sector it is meant to oversee. 

The MP-backed dossier, which is based on testimony from over 170 experts, scam victims and some of the sector’s own employees includes dozens of claims and examples alleging the Financial Conduct Authority (FCA) has failed to protect consumers.

The All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services launched its landmark publication in Parliament on Tuesday, where whistleblowers and victims of investment scams shared alarming testimony about the state of the financial watchdog and the litany of alleged failings. 

The report includes the tragic story of Ian Davis, a lawn-mower repairman from Fife who lost his entire life savings after investing in an FCA-approved fund, which turned out to be run by fraudsters. Davis took his own life in 2023. 

Andy Agathangelou, founder of the Transparency Task Force and secretariat to the parliamentary group fears that similar tragedies will “happen again in future” without action from politicians. 

He called for “black box thinking”, referring to the thorough reviews of safety standards and potential engineering faults which take place after plane crashes. 

One critique is that the regulator is seen as “bulletproof” as consumers cannot take the organisation to court, except through judicial review. And the report cites major concerns over a “revolving door” between the FCA and industry figures. 

The Financial Services Act 2021 also demanded the FCA must carry out a public consultation about introducing a legally-binding “duty of care” to consumers.

Instead, the FCA introduced a “Consumer Duty”, which Transparency Taskforce says is “toothless”, because it does not provide consumers with a so-called ‘Private Right of Action’ they need to take matters to the Courts if they have been mistreated.

Agathangelou said these issues fed into a wider “trust deficit” plaguing the financial sector, with much of the blame being laid at the FCA’s door. 

And in a warning to the Labour Government, which is planning deregulation of the City, he added: “There’s a direct correlation between growth and the need for the financial sector to be trustworthy. To get the growth we need, we need a framework that stops people being ripped off.” 

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Responding to a question from Byline Times, Agathangelou added a message to Chancellor Rachel Reeves: “We understand you want economic growth. There’s a right way. There’s a wrong way. Deregulation is a dangerous way…Doing so whilst cutting away consumer protections is a recipe for disaster. Please, don’t do that.” 

Journalist Ian Fraser told the report authors: “My perception is it is far too close to large banks – effectively “captured” – seriously disrespectful of whistleblowers, and oblivious to the suffering of their victims. This was clear from its mishandling of the RBS Global Restructuring Group scandal. It tends to throw the little guys under the bus, as it did during the Libor scandal and in numerous other instances I am aware of, rather than hold senior people or large organisations accountable.”

Whistleblowers have also allegedly been treated “grotesquely badly” by the FCA, Andy Agathangelou said.

Conservative MP Bob Blackman, chair of the All-Party Group, told attendees: “There is something seriously wrong with the FCA in its current form. Is it not possible to come to any other conclusion from the evidence”. After dealing with constituents who’d lost out from FCA-approved financial schemes, he added: “I’ve come away very disappointed indeed”. 

Robert Dellner, a former Managing Director of Structured Products at mega-bank UBS,said: “The FCA has over time been captured by industry, and its objectives and interests. It’s now a captured organisation.”

And Paul Carlier, a foreign exchange trader for 28 years who has battled the FCA on several fronts, branded the regulator a “lame duck”. 

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“The FCA has taken no action against firms over their handling of whistleblowers, despite thousands of complaints.” He called for “proper representation” from consumers – “at the moment, it’s just [advised by] industry, or worse, lawyers for firms who only represent the industry.” 

And he expressed concern about the regulator’s alleged influence over other bodies, including the Financial Ombudsman Service, which “should be entirely independent”. 

He also claimed that the FCA’s press office extends its “dark cloak” over other public bodies, with those challenging its narratives seeing their employment end “one way or another.”

Victims of financial scandals shared their experiences at the meeting. Lisa King is a ‘mortgage prisoner’, the term for those stuck on an incredibly expensive mortgage deal but unable to move to another provider. Estimates of those affected vary from around 50,000 to several hundred thousand.

King claims the FCA failed those in her position by failing to force banks to act: “We’ve been robbed” she told attendees. Helen McGregor, an investment victim, added on her case: “The FCA were warned and did nothing.” The FCA reportedly told her they could not deal with individual cases.

Mark Garnier MP, Shadow Economic Secretary to the Treasury, emphasised the importance of tough and effective regulation to ensure consumer confidence and support economic growth. 

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The report’s findings suggest that the FCA may need a complete overhaul or even a Royal Commission to restore trust in the financial services sector.

An FCA spokesperson told the Financial Times on Monday: “We sympathise with those who have lost out as a result of wrongdoing in financial services, however we strongly reject the characterisation of the organisation…We have learned from historic issues and transformed as an organisation so we can deliver for consumers, the market and the wider economy.”

However, the FT today reports that the financial watchdog has “reworked its internal whistleblowing policy” after the report criticised it for mishandling complaints from current and former employees. 

Labour peer Prem Sikka hit out at the FCA as “complacent, conflicted and captured” in comments for the report. “Without a major overhaul it will never deliver on the responsibilities Parliament has given it to protect consumers.” 

Lib Dem peer Lord Fox added: “As uncomfortable as it may be for the FCA’s leadership team to study the evidence-based critique that has been produced, I do hope it can take the analysis and recommendations as they are intended – as helpful pointers for where reforms are needed.” 

Some firms have been fined dozens of times for the same forms of wrongdoing in recent years, suggesting little change in their behaviour.

Read the full report here (PDF). 

If you’ve been adversely affected by the issues raised, you can contact the charity Samaritans any time, from any phone for free: call 116 123 or email jo@samaritans.org

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