Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps her Department is taking to ensure transparency and accountability where FCA-authorised firms fail and retail investors have losses.

The Financial Conduct Authority (FCA) assumed responsibility for the peer to peer lending sector in 2014. In 2016, the FCA launched a post-implementation review into the peer to peer and crowdfunding sector, leading to a consultation on updated rules for the sector in 2018, with a set of strengthened rules being published in 2019.

The FCA has supervisory and enforcement powers in relation to the sector, and has undertaken investigations into certain, individual firms, such as Lendy Ltd. Lendy was subject to an asset restriction and a court petition to appoint a liquidator prior to it being placed in administration. The FCA has received several complaints about its regulation of Lendy under its Complaints Scheme. We await the findings of the complaints investigation into the FCA’s actions under the Complaints Scheme.

The Government takes the accountability of the FCA very seriously. The FCA’s independence from Government does not mean it can act arbitrarily; rather, it must operate within the framework of statutory duties and powers agreed by Parliament. As well as being required to operate within this framework, the FCA is fully accountable to Parliament for how it discharges its statutory functions.

There are a number of ways in which the legal framework ensures direct accountability of the FCA to Parliament, such as a requirement for the FCA to produce annual reports and accounts, which are laid before Parliament by the Treasury. The FCA is also subject to scrutiny via departmental select committee hearings, including the Treasury Select Committee and the Lords Financial Services Regulation Committee.