Execs at City watchdog FCA face pay cuts amid fallout from LCF collapse

The City watchdog’s executive committee members face pay and bonus cuts as part of the fallout from the collapse of mini-bond firm London Capital & Finance in early 2019.

During a Treasury Committee evidence session on 1 March, the chair of the Financial Conduct Authority’s board, Charles Randell said: “The board did consider what the consequences should be for individuals and that’s why the board cancelled the performance related pay for the executive committee for the 2019-20 year.”

London Capital & Finance went into administration in January 2019 after the Financial Conduct Authority asked it to withdraw its “misleading, not fair and unclear” promotion for its retail investment productions.

Some 11,600 retail investors in risky “mini-bonds” lost out after LCF collapsed, totalling more than £237m. Since then, the promotion of mini-bonds has been banned by the FCA.

An independent review into LCF’s collapse, published in December 2020, uncovered “serious failings” on how the firm was regulated, including the FCA not acting on specific and detailed allegations about the firm by third parties made to the watchdog.

READ Timeline of the collapse of London Capital & Finance

Former High Court judge Dame Elizabeth Gloster, who authored the review, told the Treasury Committee on 1 February: “It’s a matter to which consideration should be given – not by me but by the chairman and CEO of the FCA and the Treasury in so far as the Bank of England is concerned – as to what they consider is appropriate to do in light of the serious criticism and conclusions I have made.”

In her report, Gloster singled out executive committee members Jonathan Davidson and Megan Butler, as well as current governor of the Bank of England and former FCA chief executive Andrew Bailey.

Davidson, executive director of retail supervision and authorisation, is leaving the FCA and Butler, the former executive director of supervision, is now in a new role as head of transformation.

“For 2021, there’s been a discussion about performance related pay in the executive committee despite having performed, in my view, outstandingly in its response to Covid,” Randell told the group of MPs virtually. “Considered that, in light of the impact of that on the country, it would be wrong for them to be considered for performance related pay in the current year.”

READAndrew Bailey: No easy fixes for London Capital & Finance since FCA was a ‘broken machine’

“Finally the board decided that going forward ExCo members shouldn’t receive performance related pay in the future and that it should take this opportunity to reduce both higher pay packages for ExCo members and the average levels of ExCo pay.”

“We decided that the responsibility should be collective,” he added.

On 8 February, Bailey told the Treasury Committee that there were no easy fixes that could have prevented to the demise of the firm, explaining that he had inherited a “broken machine”.

The former FCA boss said he “fundamentally disagreed” with the notion that not completing internal reforms was not an excuse for not being able to prevent LCF’s collapse in 2019.

To contact the author of this story with feedback or news, email Bérengère Sim