The Complaints Commissioner has expressed his ‘disappointment’ in the Financial Conduct Authority (FCA) for its decision to go against his recommendation and not issue a public apology to the whistleblower in the Connaught case.
Last December Complaints Commissioner Antony Townsend issued a broadside on the FCA over its handling of the collapsed Connaught Series 1 Income Fund.
Investors are understood to have lost as much as £100 million in Connaught, which invested in bridging loan firm Tiuta, when it went into liquidation in September 2012.
The Connaught fund was suspended in April 2012, but over a year before this, the chief executive of Tiuta, George Patellis, contacted the FCA’s predecessor, the Financial Services Authority (FSA). He raised concerns about the way the fund was being run, but the FSA did not address his these concerns before the fund collapsed.
Last December, Townsend heavily criticised the FCA for its dealing with the Connaught case in a 12-page report on the case following a complaint from Patellis.
‘The evidence strongly suggests that, despite considerable activity, the FSA’s approach was uncoordinated, fragmented, and was focused upon narrow issues of jurisdiction rather than overall consumer detriment. This was despite much of the evidence (some of it significant and dating back two or three years) about the larger picture being available to the FSA in 2011,’ Townsend said.
He also indicated the regulator attempted to shift responsibility away from its own possible ‘regulatory failings’ to IFAs through messaging around it being a mis-selling issue.
In Townsend’s report he recommended that the FCA conduct a review of its predecessor’s handling of Connaught. The FCA has agreed to appoint a third-party to do this, however the dates for when this will happen have not been announced.
He also recommended the FCA issue a public apology to the whistleblower Patellis. The FCA went against this recommendation and only issued a private apology to Patellis.
Speaking at the Connaught all-party-parliamentary-group (APPG) meeting last night, Townsend criticised the FCA for this decision to go against his recommendation.
‘I am disappointed that it was not a public apology,’ he said. ‘My view, and the reason I recommended [a public apology], was it would have been a recognition of the importance of the way whistleblowers are treated. You could say it is purely symbolic but I think it would have been helpful.
‘I am disappointed and I will say this in my annual report in a few months’ time, because I don’t really understand why a public apology was not issued.’
He added a public apology would have helped encourage others to come forward and said he ‘hoped’ the FCA’s decision would not discourage others from acting as whistleblowers.
Patellis said he was very pleased with Townsend’s report last year but said he is still perplexed that no one has been held accountable for the regulator's past failings.
‘Some of the FCA’s actions were reckless; they cost tens-of-millions-of pounds. The FCA discredited me and said there was no proof of fraud and it is insane they are not held accountable for that. It just seems to have been passed around and yet the mistake cost over £80 million,’ he said.
Responding to Patellis, Townsend said he appreciated his comments and his frustration, but did say some of the outcomes of his work has shown progress from the regulator.
‘The speed of the response [from the FCA] and what was done with the information, I covered in my report. The second apology you got said they accept all of my criticisms. They have gone a bit of the way – there is going to be an independent review and those are significant steps.’
The FCA was unavailable for comment.