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Britain’s financial watchdog has issued a groveling apology for the “failures” that caused hundreds of people to 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 the lack of supervision of Collateral that it accepted “opportunities were missed” and that it was “too slow” to close the company after the misconduct was discovered.
“We apologize for the FCA’s shortcomings in relation to its handling of collateral and the distress and inconvenience this has undoubtedly caused you,” the FCA said This is stated in an email to complainantsadding that it had “great sympathy for your situation”.
“Losing any amount of money can be very distressing and cause great concern and frustration,” the report said. “We are also sorry that it has taken so long for us to respond to your complaint and we accept that this has further compounded the problems.”
The FCA said it failed to detect fraudulent changes to collateral details in its register of authorized firms for two years and then closed the peer-to-peer lender only months after the misconduct was discovered.
The watchdog offered to pay £700 in compensation to collateral investors who complained about regulatory shortcomings.
It is the latest mea culpa from the FCA in recent years. It issued issued a “sincere apology” last year for taking too long to shut down Premier FX, a bankrupt payments company.
Andrew Bailey, the former head of the FCA who now heads the Bank of England, apologized in 2020 to investors who lost money at mini-bond issuer London Capital & Finance.
The FCA also apologized for a botched press conference in 2014 that caused shares in life insurers to plummet.
Collateral was set up in 2014 but did not have the necessary regulatory approvals to operate as a peer-to-peer lender, brokering loans between individuals and companies on an online platform.
However, in 2015, one of the directors fraudulently swapped the name of a separate company licensed as a lender but which he had intended to sell – Regal Pawnbrokers – for that of Collateral on the FCA’s public register.
The FCA, which took over consumer credit regulation in 2014, noticed the fraud in November 2017. But officials only told Collateral to stop trading two months later and then continued to accept money from investors for weeks, only to fall late into administration. February 2018.
The watchdog said the delay partly reflected “the risks that an immediate halt to operations would trigger a disorderly collapse and lead to damage for investors”.
The brothers who ran Collateral, Peter and Andrew Currie, were convicted to five and a half years and two and a half years in prison respectively for fraud and money laundering in July this year.
The company’s administrator estimated that around £11 million of the £17.9 million of customer loans outstanding when it went bust would not be recovered and investors have since gotten some of their money back.