Gina Miller calls for senior members of the City regulators to leave
Sir,
Time Gentleman Please – time for senior members of the City regulators to leave:
How many scandals will it take before the government replaces senior management within the endemically ineffective Financial Services Authority (FSA) and the Bank of England (BoE)?
Let us remind ourselves of the roll call of dishonour:
– Barclays et al LIBOR fixing – regulators warned by analysts, US Federal Reserve and whistleblowers as far back as 2007.
– Widespread bank interest rate swop mis-selling – regulators (FSA) ignored this for years and years before a national newspaper published an expose in 2012 and then finally acted.
– MF Global – went into administration nearly a year ago affecting thousands of UK clients but have so far just got back only 26p in the pound as against 76p to 100p in the US and Canada where foreign regulators protected clients.
– This follows are just three of numerous scandals with £millions lost by individuals; many elderly:
– KeyData: At first, concern around the firm centred on an unpaid tax bill, but then administrators discovered a black hole in its books – over £100 million of investors’ money had been stolen from a Luxembourg-based fund in which Keydata invested. The Financial Services Compensation Scheme (FSCA) declared Keydata in default, and indicated that 21,000 investors would be able to seek financial redress. The FSCS has had to pay out more than £300 million in compensation.
– Arch Cru: The mislabeling of recent Arch Cru retail funds may have acted against the public interest and contributed to the £400m+ financial scandal. In this example the industry body, the IMA, chose to classify a fund investing in unquoted African and Greek investments as being ‘Cautious Balanced’. This no doubt gave many of the elderly investors who chose to invest their life savings in these funds a completely illusory sense of security.
– AIG bonds: Coutts & Company has been fined £6.3 million by the Financial Services Authority (FSA) for mis-selling an investment fund to customers. Numerous failings were uncovered in the way the private bank sold the AIG enhanced variable rate fund to its clients. Various banks sold these AIG bonds to customers with the total amount invested being over £1.4 billion. The FSA sharply rebuked the bank over a string of failings related to the way the investment was sold. It said customers were offered the fund as an alternative to a bank or building society account, which meant they may not have realised the risks involved.
What are the two common factors to link these all – the repeated failure by regulators to do their job properly or learn from their mistakes and the lack of transparency? This immoral, though not illegal, state of the City left us with no alternative than to launch a True and Fair Campaign (http://www.trueandfaircampaign.com) and detail within an in-depth report the atrocious transparency together with a suggested code and system to improve it. The FSA has completely ignored the report.
If clients, individuals or organizations, were given 100% transparency and allowed to know clearly, simply and fully how much their financial product was costing and how it worked, such scandals would have been dramatically reduced. Yet the regulators have allowed the self-interest of the three key trade bodies, the BBA (bankers), the IMA (fund managers) and the ABI (insurers) to become quasi-regulators setting the rules. This has been an unmitigated disaster.
If it is right that senior executives at Barclays deemed culpable in the LIBOR scandal resign, does the same not apply to the senior executives at the FSA and Bank of England. Astonishingly, candidates for the next Governor of the Bank of England include the current Chairman of the FSA who presided over countless financial scandals and the BoE Deputy Governor who is alleged to have explicitly/implicitly ordered the LIBOR deceit?
Around one million people work in the UK’s financial services industry and it generates around 10 per cent of this country’s economic output. We cannot let self-serving and lax regulators destroy our biggest industry and allow its reputation to be further eroded. There was a time in the City when the phrase ‘my word is my bond’ mattered, without the right regulatory framework this is unlikely to return.
Transparency is the key – it will leave no place to hide and for the first time in decades clients will be put before self interest.
Gina Miller
Founding Partner – Chief Executive, SCM Private
Initiators of the True and Fair Campaign, London, UK