MPs have called for a “change in culture” at the UK’s financial regulator to protect consumers and financial markets following the collapse of mini-bond firm London Capital & Finance (LCF).
The Treasury Select Committee has also called for the Financial Conduct Authority (FCA) to confirm a deadline to enact a transformation programme to improve the organisation.
It comes a month after the FCA apologised to bondholders who lost millions of pounds invested in the collapsed mini-bond firm.
LCF failed in 2019 after raising £237 million from 11,000 small investors.
In December last year, a report by Dame Elizabeth Gloster found the FCA failed to properly regulate and supervise LCF and said the regulator must focus on improving internal authorisation and supervision processes.
On Thursday, the committee report called for further improvements at the FCA and said there are “doubts as to whether the FCA Board has met the standards which it seeks to impose on others”.
It said there is “over-reliance on collective responsibility” at the organisation which may “deny visible accountability” and potentially weigh on confidence in the FCA.
Mel Stride MP, chair of the Treasury Select Committee, said: “The collapse of LCF is one of the largest conduct regulatory failures in decades.
“Dame Elizabeth Gloster identified a litany of failings at the FCA regarding its regulation of LCF, and highlighted a range of changes needed at the FCA under its new leadership.
“The Treasury Committee has made some further recommendations for the regulator and the Government to help prevent another LCF.
“This includes setting deadlines and milestones for the FCA’s transformation programme, expediting HM Treasury’s consultation into the regulation of mini-bonds, and including measures to address fraud via online advertising in the Online Safety Bill.”
The MPs said it was “disappointing” that measures against fraud through online adverts is not part of the draft bill published last month.
An FCA spokeswoman said: “We welcome the committee’s report and will be providing a formal response in due course.
“As we have said we are profoundly sorry for the mistakes we have made over LCF and are committed to implementing the recommendations of The Gloster Report which are progressing at pace.
“The FCA has embarked on a wide ranging transformation programme to build a data-led regulator able to make fast and effective decisions and we are providing the committee with updates on our progress.
“We agree with the recommendation that fraud via online advertising should be included in the Online Safety Bill, as online platforms are now the single biggest channel of financial scams and fraud.”