The complainant suffered loss after she invested in a firm which was later identified as a clone. Before investing, the complainant had contacted the FCA to ask whether the firm (also regulated in Austria) was a regulated entity. The FCA confirmed that the firm was legitimate based on its registration number. The FCA also recommended that the complainant contact the Austrian regulator before investing. While the complainant did so, she did not await a response before investing and instead relied on the FCA’s assurances.
The Commissioner’s investigation found that the Financial Service Register’s entry for the firm was seriously inaccurate (the firm had been deregistered in 2006). Had the firm not been erroneously shown on the Register it could not have been cloned in the way it was. On 7 May 2019, the Complaints Commissioner published its report that the actions of the then FSA (now FCA) in failing to update the Register in 2006 contributed to the complainant’s loss and that the FCA should consider making an ex gratia payment in respect of 50% of the losses suffered (£6,500).
Later on 7 May, the FCA issued its response, stating that it did not accept the Commissioner’s recommendation. The FCA’s view is that the direct cause of the complainant’s loss was her own actions in failing to await a response from the Austrian regulator and it would not therefore be appropriate for the FCA to make a substantial compensatory payment to the complainant.
The FCA has also considered the wider question of whether, absent the statutory immunity provided by the Financial Services & Markets Act 2000, the general law would impose an obligation on the FCA to compensate consumers for errors on the Register. The FCA concluded that there would be no such obligation, stating that “[t]his is on the basis that the social policy reflected in court decisions does not support imposing on a public body, under a statutory duty to make information available to the public, responsibility towards an undefined class (the public in general) for an indefinite period for an amount which cannot be anticipated.”
The Complaints Commissioner’s decision, and the FCA’s rejection of it, are timely given that the FCA is currently working on its Directory, a new public source of information about individuals in key roles who are not included on the Register as senior managers under the Senior Managers and Certification Regime. In March 2019, the FCA announced the final rules on the Directory, with Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, stating that “[t]he new Directory will help consumers to protect themselves from unauthorised individuals by clearly and easily identifying individuals who have been banned by the FCA.” Clearly, when consulting the Directory and the Register, users will have to take into account the risk that the information may not be entirely accurate and that they should not count on being able to hold the FCA responsible for any defects.
The Directory is due to go live in March 2020 for banks and insurers and in December 2020 for all other authorised firms.