ALEX BRUMMER: FCA has been too slothful in acting on problem firms

Watchdog slams the door: Consumers are fed up to the back teeth with soft-touch, slothful regulation, says ALEX BRUMMER

The Financial Conduct Authority was always going to be a bed of nails for Bank of England governor aspirant Andrew Bailey – and so it has proved.

The thoughtful chief executive is still up to his neck in the problems of the long past, such as establishing culpability for the HBOS collapse. And he is constantly confronted with new challenges.

His response to the damaging collapse of London Capital & Finance earlier this year is to invoke little-known ‘product intervention powers’ to ban the mass marketing of mini-bonds during the upcoming ISA season.

The Financial Conduct Authority's chief executive Andrew Bailey is still up to his neck in the problems of the long past, such as establishing culpability for the HBOS collapse

The Financial Conduct Authority’s chief executive Andrew Bailey is still up to his neck in the problems of the long past, such as establishing culpability for the HBOS collapse

As much as the FCA’s forceful action is refreshing, it also invites questions about why the City regulator was so slow to act on other fronts.

Investors in Neil Woodford’s ill-fated investment empire, including myself, might want to ask why they were not warned to steer clear of investing good money after bad when the first warning of cash shortages emerged in February 2018, some 15 months before the suspension of the flagship Equity Income Fund.

Nor (as far as we know) has the FCA done anything to stop investment platform Hargreaves Lansdown from steering savers into funds on its Wealth 50 report when the information proffered turns out to be feebly researched. Suspicion remains that HL recommendations are as likely to be motivated by the promise of a discount on management fees as on the quality of funds.

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Rightly, the FCA is asking Google to show more responsibility in the way that the search engine prioritises the promotion of mini-bonds for ISAs. It is one thing using Google as a pathway to the cheapest electric kettle, but quite another when savings are at stake. Indeed, should the tech giant fail to take down websites promoting unregulated financial products, there would be a strong case for it to be made to compensate investors who lose out. It could certainly afford it.

Bailey has demonstrated with mini-bonds that the FCA can act quickly when minded to. Hopefully it is learning that consumers are fed up to the back teeth with soft-touch, slothful regulation.

Stamping ground

De La Rue is one of those definitive British companies where fame outstrips performance. But two centuries of printing banknotes, passports and postage stamps provides no assurance of survival.

We increasingly live in a cashless society. EU competition rules mean we don’t even print our own passports. Moreover, when a company becomes dependent on printing banknotes for Jeremy Corbyn’s friends in Venezuela, not getting paid for your work comes with the territory.

As an MBA graduate in the 1970s, my first commercial assignment was to assist De La Rue’s then chief executive to establish a management information system.

I spent a happy few months travelling the country visiting the firm’s units which ranged from money-transport arm Security Express, to Potterton boilers and a brickworks. When conglomerates became unfashionable some decades later, most of these enterprises were sold, leaving just the security printing activities behind.

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My personal interest in De La Rue comes from the schoolboy relic of collecting stamps. The company now looks to stand at the final crossroads. Losses are mounting, directors warn of a ‘significant doubt’ that it can continue as a going concern and the dividend has been axed. The shares plunged 24 per cent and the debt pile has surged to £170.7million and is now in excess of market value.

New chief executive Chris Vacher is promising a turnaround plan in the first quarter. That could be too late. The company’s get-out-of-jail card is the possible sale of its product authentication enterprise, which is used by sports franchises to prevent and track counterfeiting.

The philatelist within me lives in hope.

Big data

As much as it is a good idea for the London Stock Exchange to diversify into data with the transforming acquisition of Refinitiv, it would have been useful if there had been more dissent at the investors meeting.

There was a 99.27 per cent majority in favour – not dissimilar to when Royal Bank of Scotland bought ABN Amro.

Chief executive David Schwimmer has not fully explained why the LSE is willing to make a gift to Blackstone of a handsome profit on an enterprise it has owned for just over a year. This is especially true as it needs heavy investment if it is to effectively challenge Bloomberg. Heigh-ho.


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