Senior adviser Jonathan Davidson and executive director for transformation Megan Butler were both named in a report into the FCA’s oversight failures, alongside former FCA boss Andrew Bailey
Regulators at the Financial Conduct Authority (FCA) have apologised to bondholders who lost millions of pounds invested in collapsed mini-bond London Capital and Finance (LCF).
Senior adviser Jonathan Davidson and executive director for transformation Megan Butler were both named in a highly critical report into the FCA’s oversight failures, alongside former FCA boss Andrew Bailey, who ran the organisation before taking over as Bank of England Governor.
Appearing before MPs on the Treasury Select Committee, Ms Butler said she had “sincere regret” at the losses experienced by bondholders in LCF, which collapsed in 2019 after raising £237 million from 11,000 small investors.
She said: I take full responsibility for the supervision model that was designed and rolled out, and I take full responsibility for the judgments and decisions taken by individuals in my areas of responsibility.
The senior regulator, who faced scrutiny over a recent promotion to her current role, added she did not consider resigning, despite the issues raised.
She added: That was a matter that was considered closely by the board and by the chief executive and the chairman specifically, and the decision they reached was so much of what we do in the FCA whether it goes well or less well, it’s a collective endeavour.
Dame Elizabeth Gloster’s report, published last December, found the FCA failed to properly regulate and supervise LCF and said the regulator must focus on improving internal authorisation and supervision processes.
Mr Davidson told MPs he offered his “personal apologies to the bondholders in LCF”, and added: I’ve felt it very deeply and I did ask myself what could I — what could we — have done differently. He said the culture at the FCA was too focused on rules and did not take enough of a holistic approach to allegations of wrongdoing.
The senior regulator said: I think the one learning for me is that you can have lots of policies, but mindsets are really important. (We need to be asking) what is the harm I’m seeing here rather than what rule is being breached.
Ms Butler added: We had a narrow, rules-based permissions way of looking at individual cases. The step we took to tackle that was, the need to look holistically and stand back to look at potential for harm.
The regulators said it has increased its focus on improving whistleblowing services, particularly when allegations of fraud are raised and implement “use it or lose it” rules to ensure the register of FCA-approved advisors is up to date.