Disappointingly, given the two and a half years invested into this evidence-gathering project, the output is a very weak and confused document rather than something that is “potent, powerful and purposeful,” as has been claimed.

The report itself is compromised, at its very outset, by the disclaimer which blandly states that the “written testimony” including any documents “constitutes the personal perceptions” of those who gave it.

It goes on to say that the APPG “does not have the means to verify the specific allegations made, and cannot attest to the accuracy of the testimony” and that it “cannot be held responsible for the accuracy of any allegations made”.

All or some of this “testimony” may well be true, but this really is a very low bar for the wider dissemination of what are effectively unverified allegations in a document carrying the heft of Parliament.

James Daley, Managing Director, Fairer Finance, sums this up very well in his blog, which we quote with permission: “The report admits that it has mainly focused on the negatives in the testimonies. And there is no attempt to provide balance by presenting the other side of the argument. It is what, in the world of journalism, is known as a hatchet job.”

Not all of those we spoke to were critical of the report. Lewis Gurry, Director at C&G Regulatory Solutions believes that: “The APPG report raises significant questions about the FCA’s ability to fulfil its mission of consumer protection and market integrity. With its findings drawing from a broad spectrum of voices, this report is a critical resource for policymakers, industry leaders, and consumers seeking a fairer financial system.”

The FCA’s performance as regulator could improve

There is no doubt that the FCA has performed poorly in some areas:

• The name and shame proposals were poorly thought through and delivered, particularly around their messaging. And there seem to have been no consequences for the FCA senior leadership stemming from this debacle.
• Staffing issues including low morale and high turnover have persisted.
• There have been problems with the resourcing of key areas leading to delays and consequent industry (and government) frustration. This has sometimes been caused by a lack of action from senior executives in response to the expansion of the regulator’s mandate without the adequate resources being assigned. The leadership has failed to discharge its responsibilities effectively by lobbying aggressively for more resource or flagging the consequences if this is not delivered.

According to Rob Mason, Director, Regulatory Intelligence, Global Relay, while the FCA has become a more adept and effective regulator with “better industry engagement and data-driven regulation that is focused on operational resilience and that has probably resulted in avoiding a number of incidents, the fact remains that [the FCA] are hugely under-resourced to try and regulate a powerful and globally complex industry. This all adds up to the likelihood that the FCA is due a shake-up which is more probable due to the increased political focus on this important economic area.”

John Higgins, CEO, Pathlight Associates, also points to staff and resourcing as key potential underlying problems for the regulator and says that “[i]t is often easier for outsiders to identify faults in an organization; this is true of regulators, businesses and indeed the House of Commons. All organizations should regularly reflect on where their processes can be improved, by encouraging feedback from staff, leavers and clients. And of course, to do this effectively, they need to be properly resourced.”

Two groups frustrated with the regulator

Those making allegations in the report can effectively be organized into two groups:

• People with long-standing grievances against the financial services firms by which they were employed and/or the regulator.
• Investors who lost money.

Some of the allegations being made against firms and regulator are serious. But they are all effectively unsubstantiated and, in some cases, relate to grievances that followed due process and were rejected for lack of adequate evidence by firm, regulator and, possibly, the courts.

The document, in effect, provides a platform for those with an axe to grind to air previously made accusations more publicly.

Daley suggests that it is not a surprise “that there are hundreds of individuals who are unhappy with the regulator” because “regulation is hard – and can never be perfect”, but he suggests that “the fact that many people are unhappy with it does not amount to evidence that it is incompetent or dishonest.”

He counts himself as someone who is frustrated at “not getting straight answers from the FCA”, but says that he understands “why the regulator has to be guarded in which questions it answers and which it doesn’t” because if it gave “a straight response to every FOI or question it received, it could prejudice enforcement and undermine its ability to do its job.”

According to Daley and others we spoke to: “There’s a balance to be struck – and it may not be right. But it is a leap to say that this amounts to dishonesty.”

Investor harm cannot wholly be avoided

One cannot help but empathize with the other group of individuals quoted in the report – the investors who lost funds they could ill afford to.

However, and it is painful to state it like this, some of these “whistleblowers” are simply people who lost money when investing. Their consistent expectation was that FCA authorization of an investment firm would somehow make the investment completely safe and make all their losses right if it was not.

Daley makes this point very clearly in his blog: “Consumers who have lost money are of course angry with the regulator – and understandably so. But regulation cannot stop all losses and harms. And while retrospective analysis will often reveal that chances were missed to spot brewing problems – it’s harsh to make the leap that this amounted to blind incompetence.”

To position these investors as “victims” of an incompetent or malignant regulator really is stretching the truth and seems rather unfair on the regulator and its earnest staff. Daley again: “Everyone I know who works in the regulator does so because of a desire to help consumers and create a safe market. It’s right that every failure should be investigated – but it is unhelpful to indulge in finger-pointing and name calling.”

There is also no doubt that the FCA should consider a higher bar when giving approval to firms and individuals and should respond more swiftly when it receives intelligence of potential misconduct. But to suggest that authorization by the FCA is somehow going to magically eliminate risk present when investing in financial markets is both naive and unrealistic.

Higgins summarized this very neatly in his response to our request for comment: “This report found multiple instances where real consumer harm was caused, and recently we have seen cases where the regulatory response should arguably have been quicker. However, there is no such thing as a no-risk regulatory regime, and the FCA must balance consumer protection with the need to be evidence-based. It can take time to gather and validate evidence, without which there is a risk of a viable firm being pushed to insolvency by hasty action, despite having done nothing wrong.”

The report does not help move things forward

Daley concludes his blog by saying: “Can the FCA be and do better? Definitely. Does this kind of report help move things forward? Not in my view.” And not in our view here at GRIP either.

And while the FCA should and must up its game, it would be good if groups of parliamentarians held themselves to the high standards they expect of the regulator in their own work.