John McDonnell MP
The Bill will bring relief to thousands of investors who were let down not just by a failed company but by a failed system. That is why we need a Bill that will address the failures of regulation, governance and auditing, but this Bill does none of that. The Government are yet again bailing out victims of an under-regulated finance system that is regularly ripping off smaller investors. I have to say that Government Ministers are guilty of gross negligence for standing by while this happens time and again.
LCF was offering customers mini-bonds. The FCA said:
“There is no legal definition of a ‘mini-bond’”,
but it did nothing to stop the mis-selling. The FCA saw no issue with LCF’s operations, yet in March 2019 HMRC found that products advertised as ISAs by LCF did not meet the rules. In addition, the FCA was advising that investments would be protected by the financial services compensation scheme; the High Court judged that they were not. The FCA was asleep at the wheel.
The then chief executive of the FCA, who is now the Governor of the Bank of England, sat on his haunches and did nothing. Some 18 months ago, I called on the previous Chancellor, the right hon. Member for Bromsgrove (Sajid Javid), to delay Mr Bailey’s appointment as Governor, given the concerns.
I am pleased that the Dame Elizabeth Gloster’s report actually identifies some of the problems. She described the FCA’s supervision of LCF as “wholly deficient” and said that there were “significant gaps and weaknesses” in the FCA’s practices. She said that staff were
“not…trained sufficiently to analyse a firm’s financial information to detect indicators of fraud or other serious irregularity.”
LCF’s founder was Simon Hume-Kendall, a former chairman of the Tunbridge Wells Conservatives and a party donor. It has been reported that the investors’ cash in LCF has been used to buy horses, a helicopter and lifetime memberships to private Mayfair clubs. Perhaps the Minister could update us on the ongoing inquiries into the activities of this gentleman and LCF.
As has been said, this is not a one-off. There are so many other examples, including Blackmore, Basset & Gold and Chilango. Perhaps the Minister can tell us when further Bills will be introduced to compensate the investors in those schemes who lost so much money. I welcome the Bill—of course I do—but it is now time for the Government to bring forward serious legislation to stop crimes like this happening in the first place and to protect our constituents from these spivs.