City watchdog buried finding that top bosses ‘missed opportunity’ to stop investment scams

Exclusive: FCA planned to admit that it ‘missed opportunity to reconsider and act on,’ intelligence about a ‘boiler room’ scam, allowing ordinary savers to lose millions of pounds

Ben Chapman
Friday 22 October 2021 12:29
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<p>Bank of England governor Andrew Bailey has come under fire for failings at the FCA when he was its chief executive </p>

Bank of England governor Andrew Bailey has come under fire for failings at the FCA when he was its chief executive

The City watchdog buried its own finding that its top bosses missed an opportunity to stop scammers pushing investments which later collapsed with almost £70m of savers’ cash, internal correspondence indicates.

The documents raise further questions about Bank of England governor Andrew Bailey’s failure to stop an epidemic of investment fraud when he was boss of the Financial Conduct Authority (FCA).

In October last year, the FCA drafted a letter in which it admitted it had “missed [an] opportunity to reconsider, and act on” intelligence that was provided directly to Mr Bailey.

The finding was later deleted and, a year later, the letter has still not been sent to its intended recipient, a whistleblower who provided Mr Bailey with evidence about a series of alleged scams.

The FCA drafted a letter in which it admitted that it had missed an opportunity to investigate scams that ended up causing consumers millions of pounds of losses

The Bank governor had been told in 2018 about a sales company called Amyma that was deliberately targeting pensioners, making false claims and using high-pressure sales tactics to push investments that later turned out to be worthless.

Despite repeated warnings, the FCA failed to take effective action and Amyma was allowed to continue operating. One of the investments it was pushing, Blackmore Bond, went on to take £47m from savers before collapsing. Two other “minibonds” being sold by the scammers and other sales firms have resulted in combined losses of more than £20m.

Newly unearthed emails show that two of Mr Bailey’s closest aides – including his private secretary who ran his office at the FCA – discussed evidence provided by Paul Carlier, a bank whistleblower.

The watchdog’s head of enforcement, Mark Steward, told Mr Carlier he was “making inquiries” and the FCA’s head of intelligence was also copied in on correspondence about Blackmore.

While the regulator outwardly stated it was investigating, one email indicates that it took a different approach internally.

Just half an hour after Mr Carlier provided his evidence, a manager in the FCA’s intelligence team emailed Mr Bailey and Mr Steward recommending that the regulator should simply make a log of the evidence, pass it to another team and take no further action.

A manager in the FCA’s intelligence team emailed Andrew Bailey to suggest that evidence about Blackmore should only needed to be logged and passed on

The correspondence contrasts with Mr Bailey’s statements to MPs on the Treasury Select Committee earlier this year when he said he had been unable to prevent investment scams because warnings from the public weren’t being passed on by the FCA’s customer contact centre.

Gina Miller, who runs the True and Fair Campaign for better financial regulation, said the emails pointed to a “culture of cover-up” at the FCA under Mr Bailey’s leadership.

“I cease to be shocked by the ineptitude and disregard with which the FCA treats victims, all too often due to its own regulatory failure.”

Ms Miller, who is also known for her campaigning work on Brexit, called for a “radical overhaul” of the FCA’s complaints department, adding: “This document proves that the FCA decided to delete its initial finding that there was ‘a missed opportunity to reconsider, and act on, the intelligence,’ presumably to prevent criticism of Mr Bailey and Mr Steward.”

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The correspondence will heap further pressure on Mr Bailey, whose tenure as boss of the FCA between 2016 and 2020 was marred by a string of scandals.

And the regulator’s chair, Charles Randell, announced his surprise resignation last week, a year earlier than expected.

This week, the National Audit Office launched a probe into the FCA’s handling of a scandal that saw British Steel workers transfer £2.8bn of savings out of a gold-plated company pension scheme after receiving questionable financial advice.

A damning report by former Court of Appeal judge Dame Elizabeth Gloster published in December found that the FCA failed to properly regulate London Capital and Finance (LCF), an investment firm that collapsed with £237m of savers’ money. LCF is now under investigation by the Serious Fraud Office.

Dame Gloster detailed a litany of problems that meant the FCA failed to realise the significance of a “growing number of red flags”. The Treasury Select Committee described LCF’s collapse as “one of the largest conduct regulatory failures of the last three decades”.

Mr Bailey sought to have his name removed from the Gloster report, arguing that he was not personally “culpable”.

He claimed he had inherited a “broken machine” when he took charge of the regulator which he attempted to fix. However, reported losses to investment scams more than trebled during Mr Bailey’s four years at the helm.

The newly unearthed emails suggest that he was more aware of some of those reports than he has publicly admitted.

Paul Carlier, who has almost 30 years’ experience in financial services, wrote to the FCA’s whistleblowing team as far back as March 2017 to raise the alarm about a sales company called Amyma.

He reported hearing salespeople “clearly targeting” pensioners to push high-risk investments, including one called Blackmore Bond, which supposedly offered returns of 9.9 per cent, “guaranteed by one of the world’s biggest banks”. Investors have now been told they won’t see a penny of the £47m they put in.

Paul Carlier told the FCA in March 2017 about a ‘boiler room’ scam that was targeting pensioners with false claims about risky investments

Mr Carlier followed up his initial email to the FCA a week later, providing further details

Amyma also sold investments in Westway Holdings, a firm whose director was a convicted fraudster and money launderer who skipped bail in 2012 and changed his name.

A year and a half after Mr Carlier raised concerns, he found that Amyma was still operating so he escalated his concerns to senior FCA bosses, telling Mr Bailey and Mr Steward in August 2018: “Myself and my team all personally witnessed and heard each of [Amyma’s] phone calls with ‘clients’.

“The majority were clearly cold calls, and the majority clearly persons that were not sophisticated and they were clearly targeting pensioners and their pensions, all contrary to their website and FCA codes and applicable regulations.”

Andrew Bailey and the FCA’s head of enforcement Mark Steward received emails from Paul Carlier about investment scammers in August 2018

Half an hour later, a manager in the FCA’s intelligence team emailed Mr Bailey and Mr Steward stating: “My suggestion is to log the new information from Mr Carlier as intelligence, thank him for the information and advise that it has been passed to the relevant team. Given the nature of our recent interactions with Mr Carlier I don't believe we need to do any more than that.”

Mr Steward wrote back to Mr Carlier saying that he was “making enquiries”. However, the FCA did not contact Mr Carlier for more information or visit the office where the alleged illegal activity took place. Despite the allegations of misconduct, the FCA authorised Amyma in July 2018, meaning it could legally market financial products to consumers.

Mr Carlier said he grew incensed by the FCA’s inaction and complained in August the following year, demanding to know why his evidence had not been taken seriously.

After 14 months, the watchdog’s complaints department drafted a response that admitted that the evidence provided to the FCA’s executive team represented a “missed opportunity”. Tracked changes in the document show the references were later deleted. A year later, Mr Carlier has yet to receive a response.

Emails show that two of Mr Bailey’s private secretaries, Matt Brewis and Toby Hall, were aware of Mr Carlier’s intelligence and the FCA’s legal department had also seen it.

Matt Brewis, who ran Andrew Bailey’s office at the FCA, discussed Blackmore with another of Bailey’s private secretaries

The day after Mr Carlier’s evidence, Mr Brewis emailed Mr Hall, stating: “Blackmore Bonds – this was the thing that Carlier emailed about yesterday.”

He followed up to say that he assumed the evidence would be included in a report by the FCA’s legal department.

Mr Bailey declined to comment.

An FCA spokesperson said: “The assertion we did nothing is inaccurate.”

The regulator said it examined Blackmore Bonds’s promotional material at the time and took steps which led to the removal of Amyma’s website. “Amyma’s appointed representative status was then terminated in September 2019.”

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