FCA orders independent review of Connaught fund regulation

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The FCA is appointing a third party to review its regulation of firms connected with the Connaught Income Series 1 Fund.

Responding to reports by the Complaints Commissioner, the FCA says the review will start once an ongoing enforcement investigation against Connaught has finished. The FCA says it will publish the outcome of the review “to the extent that it can”.

One of the Complaints Commissioner reports was a response to IFA Adam Nettleship who had complained about the role of the FCA and predecessor regulator the Financial Services Authority in the failure of the Connaught Income Series 1 Fund. The fund was suspended in 2012.

Complaints Commissioner Antony Townsend criticised the FCA in his report saying it was slow to to reach its conclusions.

He adds: “Despite a long build-up of evidence pointing to the risk of serious consumer detriment, it failed to act in a co-ordinated fashion, and failed to involve other agencies when it clearly ought to have done so.”

He was also concerned the regulator relied too heavily on a clause in legislation that led to Nettleship being denied explanations of regulatory actions.

Townsend says: “This complaints scheme is not designed to deal with major inquiries into alleged regulatory failure, nor to provide the kinds of remedies which you are seeking on behalf of investors.”

The FCA has agreed to pay £500 to Nettleship.

The second report was in response to a complaint from former chief executive of bridging lender Tiuta George Patellis, who had contacted the FSA more than a year before the Connaught fund was suspended with evidence of alleged fraud.

Townsend says the regulator must publicly apologise to Patellis for its “lack of care” in its treatment of him as a whistleblower.

The FCA also agreed to pay Patellis £1500 for distress and inconvenience.