FCA branded ‘incompetent at best’ in scathing Parliamentary report | Money Marketing

The Financial Conduct Authority (FCA) has been labelled “incompetent at best, dishonest at worst” in a damning report by a cross-party group of MPs and Lords.

The report, compiled by the All-Party Parliamentary Group (APPG) on Investment Fraud and Fairer Financial Services, accuses the FCA of systemic failures, including regulatory inaction, cultural defects and inadequate handling of whistleblower evidence.

The 358-page report, based on testimony from 175 individuals — including whistleblowers, scam victims and current and former FCA employees — paints a troubling picture of the watchdog’s operations.

It criticises the FCA’s leadership as “opaque and unaccountable” and claims its actions have been “slow and inadequate” in addressing financial misconduct.

According to the APPG, recent efforts to reform the FCA have failed to resolve its deep-rooted problems.

The report follows years of public and political scrutiny of the FCA, heightened by high-profile scandals such as the collapse of Neil Woodford’s investment fund and, more recently, the sudden closure of WealthTek.

The FCA has been widely blamed for failing to act decisively in these cases, leading to significant consumer harm.

The APPG report highlights a “defective culture”, with FCA staff alleging a toxic environment that discourages challenges to management. Whistleblowers and former employees reported bullying, discrimination and suppression of dissenting views.

One former staff member described the culture as “the worst I have experienced in nearly 40 years”, while another said the organisation’s internal structure was characterised by “arrogance” and a lack of accountability.

To address these issues, the APPG has called for a series of reforms, some of which would require legislative action. Key recommendations include:

• Establishing a supervisory council to oversee the FCA’s effectiveness;
• Introducing stricter measures to ensure transparency and accountability;
• Overhauling the FCA’s funding model and leadership appointment process;
• Removing the FCA’s immunity from civil liability.

The APPG also suggested that if reforms fail, a more radical restructuring of financial regulation — similar to Australia’s Royal Commission approach — may be necessary.

The FCA has hit back at some of the report’s conclusions.

In a statement, a spokesperson said: “We sympathise with those who have lost out as a result of wrongdoing in financial services; however, we strongly reject the characterisation of the organisation.

“We have learned from historic issues and transformed as an organisation so we can deliver for consumers, the market and the wider economy.”

The regulator pointed to internal surveys showing rising staff engagement and recent actions, including a £320m transformation plan, as evidence of its progress.

However, critics argue that these efforts have failed to address the underlying problems identified in the report.

The report has sparked significant debate within financial and political circles. While some, like Labour peer Lord Sikka, have endorsed its findings as a necessary wake-up call, others have criticised its conclusions as overly anecdotal.

Simon Morris, a financial services partner at law firm CMS, warned against implementing “unrealistic and impracticable” reforms that could further hinder the FCA’s efficiency.