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FCA scraps exec bonuses after LCF fiasco

The FCA has scrapped performance-related pay and bonuses for senior FCA executives and is to cut average salaries for executive committee members this year following the £236m collapse of mini-bond provider London Capital & Finance.

The cuts follow criticism of the regulator’s handling of the failure of London Capital & Finance (LCF), a provider of so-called mini-bond’ investments which turned sour.

FCA chairman Charles Randell announced the pay hit this afternoon during questioning by the Treasury Committee of himself and new FCA CEO Nikhil Rathi.

Mr Randell said he was “profoundly” sorry for the mistakes over LCF and agreed that mistakes were made although said there was no serious individual culpability of FCA executives who had accepted “collective” responsibility.

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Asked about the role of FCA executive Megan Butler, he said: “The board did consider what the consequences should be for individuals and that’s why the board cancelled the performance-related pay for the executive committee for the 2019/20 year. 

“For 20/21 there’s been a discussion about performance-related pay and the executive committee, despite having performed in my view outstandingly in its response to Covid, considered that in light of the impact of that on the country it would be wrong for them to be considered for performance-related pay in the current year and finally the board decided that going forward Exco (Executive Committee) members shouldn’t receive performance-related pay in the future and that it should take this opportunity to reduce both higher paid packages for Exco member and the average levels of Exco pay.” 

“We decided that the consequences which flowed from this should be collective,” he said.

Treasury Committee chairman Mel Stride MP said it seemed at the FCA as if the “buck never really stops anywhere.”

Mr Randell replied that the buck stops with him.

Late last year the FCA announced sweeping reform of its organisation following the damning independent inquiry into the watchdog’s regulation of LCF by former judge Dame Elizabeth Gloster.

Former FCA CEO and now Bank of England Governor Andrew Bailey told the Treasury Committee in evidence recently that the FCA had missed 600 ‘red flag’ warnings from investors on LCF due to a lack of “machinery” to extract the warnings from hundreds of thousands of incoming calls to its call centre.

The FCA is now implementing nine major reforms following publication of the Gloster Report. The report, carried out by former judge Dame Elizabeth Gloster, found the FCA failed to protect LCF investors and uncovered major weaknesses in regulation.

LCF ripped off more than 11,600 investors by encouraging them to invest £236m in non-regulated ‘mini-bonds’ before it collapsed. It had both regulated and non-regulated arms.

The Executive Committee members of the FCA include: Nikhil Rathi, chief executive; Mark Steward, executive director of enforcement and market oversight; Megan Butler, executive director of transformation; Nausicaa Delfas, executive director of international; Sheldon Mills, executive director, consumer and competition; Sheree Howard, executive director, risk and compliance oversight and Sean Martin, general counsel.

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