Jurisdiction(s):
United Kingdom

FCA fines PwC £15m over LCF scandal—first FCA auditor sanction—despite Gloster review criticising FCA oversight

Published on: 20 August 2024

Published by an LexisNexis Financial Services expert

Legal News

Article summary

A scathing 2020 assessment of the watchdog’s oversight of LCF, which failed in 2019, pointed to auditors’ reporting duties as a partial defence by the regulator. Yet Elizabeth Gloster, the former Court of Appeal judge who headed the inquiry, firmly insisted the auditors’ conduct did not, at all, excuse the Financial Conduct Authority (FCA) for ignoring fraud warnings at the firm. The FCA has shifted blame towards the auditors. More precisely, it has singled out PwC, the firm responsible for LCF’s 2016 audit. Announcing a £15m penalty on PwC last week, Therese Chambers, the watchdog’s enforcement chief, said there were multiple ‘red flags’ that should have triggered suspicion of fraud. ‘They ought to have responded at once. By not doing so, they denied the FCA information that could have been crucial’. That stance jars when read against the near-500 pages of Gloster’s report, which records numerous occasions on which the FCA received crucial information and elected not to act.

‘Unregulated mini-bonds’

LCF went under in January 2019, leaving over 10,000 investors owed millions, after the FCA instructed the firm to pull advertising for its mini-bonds...

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