The FCA has been ordered to pay £4,000 compensation to a complainant which caused £100m in consumer losses and redress.
The Financial Regulators’ Complaints Commissioner ordered the watchdog to pay £4,000 and apologise to the complainant after reviewing the FCA’s handling of the case.
The Commissioner upheld the complaint (FCA response: FCA001645) due to the FCA failing to ensure important material was not overlooked during the disclosure phase of the case.
The FCA accepted most of the Commissioner’s findings but has disagreed about when compensation should be paid. It has told the Commissioner it will deduct the compensation from the money owed to it by the complainant, defying the Commissioner’s instructions.
The FCA said the complainant’s actions caused consumer losses in excess of £50 million and FSCS compensation payments in excess of a further £50 million.
The complainant firm, which has not been identified and has not yet paid its FCA fine, complained to the Commissioner that the FCA had, ‘overlooked’ disclosure of material documents during the investigation.
The fined firm made a number of complaints to the Complaints Commissioner including that it, “had been unreasonably and unfairly treated by the FCA, specifically by employees in the FCA Enforcement Division.”
Following the upholding of the complaint, the FCA has apologised, taken steps to ensure material is not ‘overlooked’ in future and increased its ex-gratia offer to the complainant.
The FCA said it accepted that £4,000 was an appropriate payment to make to the complainant for the shortcomings but said it would set this sum against the outstanding fine yet to be paid by the complainant.
In its response to the Commissioner the FCA said that it would refuse to pay its ex-gratia compensation payment before the complainant had settled outstanding fines and costs.
It said: “The complainant’s actions caused consumer losses in excess of £50 million and FSCS compensation payments in excess of a further £50 million (funded by regulated firms and ultimately their customers).
The £4,000 (ex-gratia payment) due to the complainant will also be funded by regulated firms and ultimately their customers. The complainant has not yet paid the financial penalty imposed by the Upper Tribunal and the FCA has not sought to enforce this penalty until the conclusion of this complaint.
“There is an error in the Commissioner’s Final Report at paragraph 62 which states, ‘Notably the FCA did not decide to offset the debt owed with the costs order the Judge ordered in the Upper Tribunal matter.’ This is incorrect. The FCA did offset the costs awarded to the complainant against the financial penalty ordered by the Upper Tribunal.”
In its response the FCA added: “We have weighed these factors very carefully and concluded that offsetting the payment due to the complainant in respect of this complaint against the financial penalty ordered by the Upper Tribunal against the complainant is the appropriate outcome. While we note that by offsetting the ex gratia offer we are not accepting the Commissioner’s recommendation in this regard in full, our view is that this decision is consistent with the FCA’s treatment of the costs award made by the Upper Tribunal and is the fairest outcome. We will pay £4,000 to the FCA’s account for financial penalties to ensure the correct treatment of funds collected through fines.”
The Complaints Commissioner has told Financial Planning Today that complainants are not normally identified except in exceptional circumstances.
