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The UK’s financial watchdog has issued a grovelling apology for “failings” that let hundreds of people lose millions of pounds they invested in a fraudulent peer-to-peer lender.
The Financial Conduct Authority told more than 300 people who had complained about its bungled oversight of Collateral that it accepted “opportunities were missed” and that it was “too slow” to shut the company down after discovering its wrongdoing.
“We are sorry for the FCA’s failings in relation to its dealings with Collateral and the distress and inconvenience this has undoubtedly caused you,” the FCA said in an email to complainants, adding that it had “a great deal of sympathy for your situation”.
“Losing any sum of money can be deeply upsetting and a cause of significant worry and frustration,” it said. “We are also sorry for the length of time it has taken for us to respond to your complaint, which we accept may have added to any distress.”
The FCA said it had failed to spot fraudulent changes to details about Collateral in its register of authorised businesses for two years and then only shut down the peer-to-peer lender several months after discovering the wrongdoing.
The watchdog offered to pay £700 in compensation to Collateral investors who complained about regulatory failures.
It is the latest mea culpa from the FCA in recent years. It issued a “sincere apology” last year for taking too long to shut down Premier FX, a collapsed payment company.
Andrew Bailey, the former head of the FCA who now runs the Bank of England, apologised in 2020 to investors who lost money at minibond issuer London Capital & Finance.
The FCA also apologised for a botched 2014 press briefing that sent shares in life insurers tumbling.
Collateral was set up in 2014 but did not have the necessary regulatory approvals to operate as a peer-to-peer lender, which involved intermediating loans between individuals and businesses on an online platform.
However, in 2015 one of its directors fraudulently swapped the name of a separate company which was authorised as a lender but that he had agreed to sell — Regal Pawnbrokers — for that of Collateral on the FCA’s public register.
The FCA, which took over regulation of consumer credit in 2014, noticed the fraud in November 2017. But officials only told Collateral to cease trading two months later and it continued to accept investors’ money for weeks after that, only collapsing into administration in late February 2018.
The watchdog said the delay reflected in part “the risks that an immediate cessation of business would cause a disorderly collapse and result in harm to investors”.
The brothers who ran Collateral, Peter and Andrew Currie, were sentenced to five and a half years and two and a half years in prison respectively for fraud and money laundering in July of this year.
The company’s administrator estimated about £11mn of the £17.9mn of customer loans outstanding when it collapsed would not be recovered and since then investors have had some of their money returned.
