Key Facts

• Amendment requires a report within six months of Act coming into force.
• Report assesses impact of compensating London Capital & Finance plc customers.
• Report includes an assessment of regulatory failures that led to the need for compensation.
• Report outlines measures the Government is taking to prevent similar regulatory failures in future.
• Report details criteria for government compensation following investment firm collapses.
• The estimated cost of the compensation scheme is about £120 million.
• There have been only two other similar cases in recent decades: Barlow Clowes and Equitable Life.
• The level of compensation set by the Government is 80% of the maximum level allowed by the Financial Services Compensation Fund, which is £68,000.
• LCF is unique in being the only FCA-authorised firm to sell mini-bonds for on-lending.
• The amendment aims to clarify the conditions under which taxpayer compensation is due.
• Multiple regulatory failures, including misleading promotions and lack of holistic approach by the FCA, contributed to LCF's collapse.
• The Bill is expected to cost over £400 million.
• Investors may have lost up to £1 billion in other company collapses with similar characteristics to LCF.
• The amendment seeks clarity on why compensation is being provided for LCF victims and not others.
• The Bill aims to compensate LCF bondholders.
• Eight mini-bond firms have failed in recent years, with LCF being unique due to its scale and structure.
• The Financial Conduct Authority (FCA) is reviewing eight mini-bond firms that have collapsed recently.
• The Government is consulting on proposals to regulate non-transferable debt securities (mini-bonds).
• HMRC and the FCA have established an ISA intelligence working group.
• From autumn, HMRC will conduct audits of ISA managers to detect technical breaches of regulations.
• London Capital & Finance plc was selling unregulated mini-bonds.
• Mini-bonds were not on-lending but pyramid selling.
• The Government's case is questioned for its coherence.
• The amendment targets recommendations in pages 47 to 49 of Dame Elizabeth's Gloster Report.
• Recommendation one calls for holistic regulation of companies selling unregulated products.
• The report highlights a failure by the FCA to act on warnings about LCF despite regulatory concerns.
• My hon. Friend Gareth Thomas raises concerns about the FCA’s perimeter point in Dame Elizabeth Gloster’s report.
• Recommendation 13 is about ensuring that the legislative framework keeps pace with selling products through technological platforms.
• The amendment seeks a report on the implementation of the 13 recommendations by both the FCA and Treasury.
• The Gloster report highlights significant issues with the FCA's approach to regulatory perimeter and policy clarity.
• The FCA failed to consider London Capital & Finance plc (LCF) holistically.
• There is a need for updating legislation to address gaps in consumer protection laws.
• The FCA approved a decision two years ago which Liverpool Victoria (LV) said had nothing to do with demutualisation.
• Dame Elizabeth Gloster's finding that the FCA had not figured out how to handle business decisions holistically is crucial.
• There are no policy documents from the FCA regarding the handling of LV's demutualisation.
• The Treasury accepted four of Dame Elizabeth's recommendations regarding the Treasury.
• The FCA committed to implementing nine of her recommendations applicable to it.
• Charles Randell provided a detailed update on progress in a letter to the minister dated 16 April, published on the FCA’s website.
• A further update will be given in the FCA's annual report due in July and updates every six months until completion of the programme.
• The Treasury Committee intends to publish its report on the FCA’s regulation of LCF before June end.
• London Capital & Finance plc (LCF) entered administration in January 2019.
• The scheme will compensate around 8,800 LCF bondholders for losses amounting to £120 million.
• Clause 1 establishes the financial authority for the Treasury to incur expenditure on the compensation scheme and allows the FSCS to administer it.
• Amendment 3 seeks to prevent loans to the Pension Protection Fund until an impact assessment is laid before Parliament.
• Amendments 5 and 6 would require reports on pensions fraud levels and the operation of the Fraud Compensation Fund within twelve months of Royal Assent.
• The People’s Pension fund and NEST paid 37% of the £6.9 million raised by the Fraud Compensation Fund in 2019, despite managing only 1% of total UK workplace pension assets.
• All proposed amendments to the clause are currently being debated.
• Amendments 5 and 6 are specifically mentioned as part of the ongoing debate.
• Pension scams have increased since 2015 due to confusion around pension freedoms.
• Victims can lose their entire pension pot and incur tax penalties from HMRC.
• The High Court judgment linked to the loan under discussion highlights fraud issues.
• The Select Committee on Work and Pensions recommended reviewing aspects of pension freedoms and the Pension Protection Fund.
• Clause 2 allows the Secretary of State to make a loan to the Pension Protection Fund board following a court decision.
• The Fraud Compensation Fund has assets of £26.2 million and a potential liability of £350 million from a court judgment.
• Amendment 3 seeks an impact assessment, which is precluded by section 22 of the Small Business, Enterprise and Employment Act 2015.
• Section 22 of the 2015 Act excludes impact from the definition of regulatory provision.
• The PPF will run out of money by October if the legislation is not progressed.
• Project Bloom and work of the Money and Pensions Service are already in progress.