Your complaint
Your complaint can be summarised into the following parts:
Part One
You allege that the FCA’s actions, in forcing Collateral (UK) Ltd (Collateral) to close, have put investor monies at greater risk.
Part Two
You allege that the FCA has been incompetent in failing to secure the investor database and website after knowing that things were not right.
Part Three
You allege it was a major oversight on the part of the FCA in appointing costly administrators, which amounts to dissatisfaction with the FCA’s choice of administrator.
Part Four
You have expressed dissatisfaction with the fees being charged by the administrators as part of the administration process, which you say has cost dearly in forensic accounting costs. You believe your investment is at risk of being used to pay for the highly expensive administrators appointed by the FCA.
Resolution
To resolve your complaint, you have stated you would like compensation from the FCA for any loss incurred, which you say should amount to a full reimbursement of capital and interest due.
Background to your complaint
Collateral operated a peer-to-peer website for approximately two years, during most of which time, it purported to have an interim permission (‘IP’) pending an application for full authorisation. You state that you believed the firm was fully authorised to carry out the activities it was doing.
On 4 April 2018, the FCA published a news story highlighting that none of the Collateral Companies held any valid authorisation or permission to carry out regulated activities. It stated that, when challenged by the FCA, the Collateral Companies agreed to cease their lending activities and, on 26 February 2018, the lending platform became inoperative. Following this, the firm voluntarily entered administration.
Collateral was required to obtain approval from the FCA when appointing an administrator, however, this did not happen. Accordingly, the FCA intervened in applying to the Court to have new administrators appointed. On 27 April 2018, the Court agreed that the appointment of the previous administrator had been invalid and the Court appointed Messrs. Shane Crooks and Mark Shaw of BDO LLP as joint administrators of the Collateral Companies.
Decision
Parts One and Two
I am deferring our investigation of these parts of your complaint. This is because they are connected with some form of continuing action by the FCA.
Part Three
I have not upheld this part of your complaint.
Part Four
This part falls outside the scope of the Scheme.
Findings
Parts One and Two
The regulatory status of Collateral, and the events which led to the Register entry for the IP in question appearing to show Collateral as an authorised firm, are matters which are subject to an FCA Enforcement investigation. The circumstances in which the Collateral platform ceased to operate and the interaction between the FCA and the directors of the firm are matters which will also be considered as part of the FCA Enforcement investigation.
We are generally only able to begin investigating a complaint after we have satisfied ourselves that in doing so, it will not pose a serious risk of jeopardising the ongoing action by the FCA. For that reason, we are deferring our investigation of Parts One and Two of your complaint. We will periodically reassess whether there remains justification for further deferral.
I’ve set out further information below about deferred complaints under the Scheme.
Deferred complaint
The Scheme sets out what the FCA will do in circumstances where there is continuing action at the time a complaint is made. Paragraph 3.7 of the Scheme states:
‘A complaint which is connected with, or which arises from, any form of continuing action by the regulators will not normally be investigated by either the regulators or the Complaints Commissioner until the complainant has exhausted the procedures and remedies under FSMA (or under other legislation which provides for access to the Scheme) which are relevant to that action. The complainant does not have to be the subject of continuing action by the regulators for this provision to be engaged. An investigation may start before those procedures are completed if, in the exceptional circumstances of the case, it would not be reasonable to expect the complainant to await the conclusion of the regulators’ action and that action would not be significantly harmed.’
It may be helpful for me to explain the objective which underlies paragraph 3.7. The objective is to ensure that a complaint investigation does not cause detriment to, or prejudice, any ongoing work by the FCA. Such interference may inhibit the FCA from achieving its statutory objectives in a timely manner.
I have considered, in line with Paragraph 3.7 of the Scheme, whether there are exceptional circumstances relating to your case, but have concluded that there are not, and that the reconsideration of an investigation of your complaint should take place after the conclusion of any enforcement action which may result from the current investigation or every six months, whichever is sooner.
Part Three
This part of your complaint concerns the FCA’s decision to propose the appointment of Messrs. Shane Crooks and Mark Shaw of BDO LLP as joint administrators. I have therefore considered what responsibility fell upon the FCA in this situation and examined the FCA’s reasons for requesting a change of administrator from the court, from Gordon Craig of Refresh Recovery to BDO LLP.
The reasons surrounding the FCA’s actions primarily relate to two things: first, the appointment of Refresh Recovery was invalid, and second, the FCA also had concerns about Refresh Recovery and the previous administrator, Gordon Craig.
With regards to the first point, the process relating to the appointment of an administrator is governed by law1. Collateral was required to obtain approval from the FCA when appointing an administrator, which it did not do.
1 (section 362A, when read together with section 362(1)(c), of the Financial Services and Markets Act, 2000)
2 You can read the Notice here -
www.thepensionsregulator.gov.uk/-/media/thepensionsregulator/files/import/pdf/dm6734446.ashx 3 Available here -
www.thepensionsregulator.gov.uk/-/media/thepensionsregulator/files/import/pdf/dm6736555.ashx 4 (see
beta.companieshouse.gov.uk/company/06314608) With regards to the second point, the FCA was concerned with the arrangements of the administration by Refresh Recovery. The FCA’s application to the Court was done so on the basis that the FCA feared Mr Craig will be inclined to conduct the administrations in a manner advantageous to the directors of Collateral rather than in the best interest of investors. The FCA was of the view that there was a risk of funds belonging to investors being dissipated.
Moreover, Mr Craig has been subject to a Final Determination Notice2 issued by The Pensions Regulator. This Notice suspends Gordon Craig, purportedly appointed by the Companies, from acting as trustee of a pension scheme on the basis that he is under investigation by the police for conspiracy to defraud. In a separate Notice3, he was replaced as trustee of a pension scheme and criticised on the basis that he had made substantial financial payments to himself from scheme assets. I also note that, on 18 July 2018, Refresh Recovery, has been placed into administration4. Following this, on 25 October 2018, the Insolvency Licensing Committee of the Institute of Chartered Accountants in England and Wales withdrew Mr Craig’s licence to practice
as an insolvency practitioner on the grounds that his continued authorisation was likely to be prejudicial to the public interest5. 5 See
www.icaew.com/-/media/corporate/files/about-icaew/what-we-do/protecting-the-public/disciplinary-orders/december-2018.ashx?la=en (page 32)
Returning to Collateral, the High Court agreed that the appointment of the previous administrator had been invalid and, on 27 April 2018, the Court accepted the FCA’s proposal and appointed the administrators, Shane Crooks and Mark Shaw of BDO LLP. It is important to note that it was ultimately the Court that appointed Messrs. Shane Crooks and Mark Shaw as the joint administrators.
I have examined the FCA’s reasons behind the proposal for the appointment of Shane Crooks and Mark Shaw of BDO LLP as the preferred administrators. I understand that the FCA had considered a number of different options involving a number of possible insolvency practitioners before deciding that Messrs. Shane Crooks and Mark Shaw of BDO LLP were most suitable based on their previous experience and expertise.
The FCA’s role now is to investigate the conduct of Collateral and its former directors during the course of its trading. The FCA does have rights to receive all documents provided to creditors as part of the administration and the right to be heard at any hearing. The FCA is entitled to attend and make representations (though not to vote) at a meeting of the creditors’ committee. The FCA has the right to apply to the court if it considered the administrator was acting improperly.
Part Four
The part of your complaint effectively amounts to a complaint about the actions of the administrators with regards to their fees, and not the actions of the FCA. In which case, this Scheme would not be an appropriate vehicle to examine such concerns.
The Scheme is in place to deal with complaints that arise from the exercise of, or failure to exercise, any of the FCA’s relevant functions. This is set out in paragraph 1.1 of the Scheme:
Part 6 of the Financial Services Act 2012 (the Act) requires the regulators to maintain a complaints scheme for the investigation of complaints arising in connection with the exercise of, or failure to exercise, any of their relevant functions.
Although I have not investigated your complaint formally under the Scheme, I liaised with the area of the FCA most closely connected to your complaint in order to provide you with a response to the matters raised.
I can confirm the FCA continues to liaise with BDO LLP during the course of the administration (and, since 10 May 2019, the liquidation) but it is the responsibility of BDO LLP (and not the FCA) to conduct the administration for the benefit of creditors (which in this instance includes all those who lent money through Collateral).
If you are unhappy with any action of the administrators then you can raise this through the creditors’ committee. In addition to the above, complaints over BDO LLP’s conduct should be addressed directly to BDO LLP or the Insolvency Service. Further information about the Insolvency Service and how to complain about an administrator can be found here -
www.gov.uk/complain-about-insolvency-practitioner.
Conclusions
In conclusion, our investigation of Parts One and Two have been deferred because of ongoing FCA action.
With regards to Part Three, the relevant business area within the FCA have demonstrated that the measures taken by the FCA were aimed at protecting investors. From the information I have seen, I am persuaded that the actions of the FCA were appropriate in the circumstances.
Finally, Part Four falls outside the scope of this Scheme. While the FCA is concerned, in line with its objectives, that the rights of consumers are adequately protected, the FCA’s role is not to oversee the work of the administrators: that is the role of the creditors’ committee and, ultimately, the court. Concerns about the fees being charged by the administrators can be escalated to BDO LLP or the Insolvency Service.
The role of the Complaints Commissioner
The Complaints Commissioner is the independent person appointed by the Regulators to be responsible for the conduct of investigations in accordance with the Scheme. If you are dissatisfied with the decision you may refer your complaint to the Complaints Commissioner who may decide to carry out an investigation. A referral to the Complaints Commissioner should be made within three months of the date of this letter, although a referral outside the three months' time limit may, where there are adequate reasons for the delay, still be considered by the Complaints Commissioner.
If you decide to contact the Complaints Commissioner, the address is as follows:
Office of the Complaints Commissioner
23 Austin Friars
London
EC2N 2QP
Telephone: 020 7562 5530
Email: complaints@frccommissioner.org.uk