Read the report of the independent investigation into the events relating to the FCA’s regulation of London Capital & Finance (LCF) following the firm’s failure.
Investigation website
As part of the Independent Review, Dame Elizabeth Gloster and her team created a website to provide updates on the investigation and relevant information. This website and its content was owned by the independent investigation team and was correct at the time of publishing. We've taken down this website and you can find the content in the document below.
Background to the LCF review
On 30 January 2019, LCF entered administration. This followed action taken by the FCA in December 2018 to direct LCF to immediately withdraw its promotional material due to the way it was marketing its retail investment products (often referred to as mini-bonds), which was misleading, unfair and unclear.
LCF issued mini-bonds to 11,625 investors, with a value of £237,207,497. Issuing mini-bonds is not normally a regulated activity, so firms issuing mini-bonds don’t usually need to be authorised by us.
However, when an authorised firm approves a promotion for mini-bonds, they must ensure that it’s in line with FCA rules that the financial promotion is fair, clear and not misleading. This means, for example, that risks must be appropriately communicated.
On 23 May 2019, following a request from the FCA’s Board, the Economic Secretary to the Treasury directed the FCA to carry out an independent investigation into the circumstances surrounding the collapse of LCF.
A Protocol (PDF)[2] was published on 25 July 2019, setting out the approach to the investigation, led by Dame Elizabeth, and underlining the nature of the review.
Alongside this, the Treasury announced it would review the wider policy questions raised by the case of LCF. These related to the regulatory and tax treatment of the kinds of retail investment products issued by LCF (often referred to as mini-bonds).
Gloster Review
The Independent Reviewer, Dame Elizabeth, was approved by the Treasury to investigate the circumstances surrounding the collapse of LCF.
The Treasury published her report[3] on 17 December 2020, assessing the FCA’s actions, policies and approach when regulating LCF between April 2014 and January 2019.
PA Consulting report
The final report of the Independent Review refers to a report produced by PA Consulting in 2016. The FCA commissioned PA Consulting to conduct an effectiveness assessment of the FCA’s approach to flexible firm supervision. The report was provided to Dame Elizabeth as part of the Independent Review.
Read the PA Consulting report (PDF)[4].
Letters relating to the review
- Dame Elizabeth Gloster’s letter to the FCA (15 May 2020)(PDF)[5]
- Charles Randell, Chair of the FCA, letter to Dame Elizabeth Gloster (26 May 2020)(PDF)[6]
- Dame Elizabeth Gloster’s letter to the FCA (21 August 2020)(PDF)[7]
- Charles Randell's letter to Dame Elizabeth Gloster (22 August 2020)(PDF)[8]
Dame Elizabeth Gloster’s biography
Dame Elizabeth has had a distinguished career as a barrister and as a judge in the High Court and the Court of Appeal. As well as her work as an international arbitrator, she has deep experience in commercial law and brought expertise in financial services, insolvencies and regulation to this role.
FCA response
In our response (PDF)[9], published on 17 December 2020, we explained that we accepted the review’s 9 recommendations for us. We set out what we’ve done and what we would do next to implement fully the review’s recommendations.
What we did
We accepted and implemented each of the 9 recommendations made to us in the LCF Review.
The LCF Review also made 4 additional recommendations for the Treasury and wider Government, and we gave them advice and support as they considered these.
The FCA Board – and its Audit and Risk Committees – oversaw the implementation of the recommendations of this and the Connaught Review[10] (led by Mr Raj Parker).
- In July 2021, we issued an update (PDF)[11] alongside our annual report.
- In December 2021, we provided a full report (PDF)[12] on our work against each recommendation.
- Our implementation work concluded in June 2022 and was subject to assurance carried out by an independent function in the FCA.
Letters on implementing the recommendations
Complaints
In March 2022, we published our response (PDF)[15] to the Complaints Commissioner’s Final Report (PDF)[16] on the LCF complaints that were referred to the Office of the Complaints Commissioner (OCC).
We also set our broad approach to assessing LCF complaints[17].
05/11/2019: Link added Independent investigation website
