Please find a full transcript of my complaint made on
www.fca.org.uk/about/complain-about-regulators.
Today's date: Wed, 13/11/2019
Date when issue arose: Tue, 12/11/2019
Brief details of your complaint:
I am an investor in Funding Secure which was FCA regulated and went into Administration on on the 23 October 2019.
Funding Secure was a peer to peer lender which provided a facility for retail investors to invest in loans with third parties which were secured by assets. I understand that peer to peer lending has risks and I accept these.
The initial administrators report has identified key failings in the controls at Funding Secure including:
- No plan for how loans would be managed in the event of administration
- Loans not being issued in line with the terms and conditions of the site. This includes loans being issued to borrowers without the investor being the clear beneficiary of the proceeds.
- There have also been large scale defaults of loans issued by the site including fraud
- Directors have outstanding loans from the company which have not been repaid
The administrator report identified that the weak controls were identified in October 2018.
I believe that the oversight by the FCA has failed in three key respects:
1) Ensuring the company had sufficient controls in place to protect investors when FCA authorisation was granted
2) The plan to wind down the company was according to Funding Secure's website (https://www.fundingsecure.com/risk-warnings) required by the FCA "In line with the FCA’s requirements, FSL’s wind-down policy articulates the necessary provisions in place that aim to maintain client’s best interests." As there is seemingly no plan for the wind-down of the company in the interest of investors I believe the FCA have been negligent in ensuring the wind-down plan existed or was appropriately implemented
3) The FCA should have been aware of the control failures at the company from at least October 2018, however the company was allowed to trade and take investor deposits for a year after this time.
The administrators propose that investors accept a proposal which would see investor proceeds being mixed with other creditors, removing the ring-fencing of investor funds and allowing other creditors to potentially have beneficial access to proceeds from investor loans. The proposal would also allow the administrator to deduct their fees from the proceeds of the loans. This outcome is materially bad for investors and means that the ring-fencing of client funds is for peer to peer lenders, in practice worthless.
Brief details of the steps you have taken so far to try and resolve the matter (including any compensation received to date):
None - the company is in administration and the proposals from the administrators are not in investors interests. There is no other party to offer a better outcome to investors.
Misconduct alleged:
1) Authorisation of Funding Secure without proper assessment of the companies controls
2) Failure to ensure that Funding Secure had an appropriate wind-down plan in the event of the platforms failure
3) Failure to take appropriate action when it was clear in October 2018 that there were inappropriate controls in place
Remedy sought:
1) The FCA to take ownership to implement a wind-down process of the loan book in the interest of investors
2) The FCA to refund investors for losses which could reasonably have been avoided had the controls at Funding Secure been reasonable