As you can probably imagine after all this time I have gathered a vast number of files regarding Col.
Of course there are a very large number of formal complaints that remain unswered.
I have written 18 which cover all aspects of the FCA's failures, some centre on one issue, others pull issues together.
I have copied below a complaint I submitted on 28/09/21 since I believe it shows in reasonably short form (!) how the FCA failed Col investors so badly. They didn't even get the basics right.
For those Col investors who have not followed the saga as closely as I have it shows some of the questions that the FCA still have to answer 6 years on.
Obviously a lot more has come to light since I wrote this complaint.
(sorry but all the formatting is not reproduced)
Collateral (UK) Ltd in Liquidation
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Please add this complaint to my existing complaints (deferred) Ref. XXXX.
Again I make the additional information in support of my previous complaints on behalf of myself (Peter Cornell) my wife (XXX) and my Ltd Co. (XXX).
This documentation takes its form as a series of complaints which point towards serious regulatory error. Each separate complaint in this overall complaint requires a detailed answer.
The Register
The FCA created the Interim Permission register (IP register) when it took over regulation of consumer credit from the Office of Fair Trading.
The FCA was required by law to maintain and publish the register. Letter_to_Lord_Myners_Collateral__UK__Limited.pdf (parliament.uk)
The IP register was insecure which allowed a director of Collateral (UK) to change the IP register entry for 656714 (Regal Pawnbroker – a company of which he was a Director) to show “Collateral (UK) Ltd”.
The IP register did not include any ‘flagging’ to show that changes had been made. The FCA did not put in place measures that would have allowed them to detect illegitimate entries. Ref. FOI6557.
The FCA did not include the Company Number on the IP Register entry so it was not possible for investors to identify the change of name on the register.
The IP register did not contain the Company Number.
Why did the FCA set up and run an insecure register that did not include even basic safeguards?
Why did the FCA fail to provide a secure register as required by law?
Why did the IP register not show the Company Number which would have allowed the FCA and investors to spot the inconsistency with Companies House records?
Why did the FCA advise consumers to trust an insecure register?
Complaint. The IP register was insecure and open to abuse. The IP Register did not include basic safeguards. The IP Register did not include the Company Number. The FCA did not run a secure Register as required by law. The FCA advised me and other consumers to trust the Register.
The implication for me is that I trusted an insecure resource which told me that Collateral was regulated when it was not. I would not have invested in Collateral without the reassurance that the Register entry provided. The FCA through its lack of care in the setting up and running of the IP register caused my losses.
The Part 4A application
Collateral applied for permission to operate a peer-to-peer (P2P) lending platform and paid the FCA fee. Ref. FOI6442.
Collateral applied for Part 4A authorisation on 23/03/2016. The FCA dealt with the application “on the basis that it held an interim permission”. Ref FOI6463.
By accepting the invalid application the FCA prevented the IP register entry from lapsing automatically.
In accepting the Part 4A application this allowed Collateral to claim “authorised and regulated by the Financial Conduct Authority - FCA Number 656714” which consumers checked against the IP register causing them direct harm.
Why did the FCA not perform any checks to ascertain that Collateral held an interim permission?
Complaint. A simple check of information already held by the FCA and held at Companies House would have shown that the entry on the IP Register to be incorrect. Collateral would not have been able to claim to be authorised and consumers would not have seen the website.
The implication for me is that I saw the website and invested. If I had not seen the website I would not have been able to invest and would therefore not have lost a single 1p. The lack of simple checks that the FCA should have carried out directly caused my losses.
The Approvals Process
Section 55v FSMA states specifically
(1)An application under this Part must be determined by the regulator to which it is required to be made (“the appropriate regulator”) before the end of the period of 6 months beginning with the date on which it received the completed application.
(2)The appropriate regulator may determine an incomplete application if it considers it appropriate to do so; and it must in any event determine such an application within 12 months beginning with the date on which it received the application.
The FCA received the application from Collateral on 23/03/2016 Ref. FOI6463.
BDO the FCA appointed Administrators stated “there had historically been a protracted dispute between the Companies and the UK Financial Conduct Authority (the “FCA”) as to whether the Companies were carrying out a regulated activity, and therefore whether they required relevant permissions from the FCA.” Ref.
www.bdo.co.uk/getmedia/480f0a92-c653-431e-b051-54687aa5908a/Collateral-Companies-Joint-Administrators-Proposals-21-June-2018.pdf.aspxThis dispute was regarding whether the Companies were carrying out regulated business.
Collateral openly claimed to offer peer-to-peer loans, a regulated activity.
Why did the FCA did not obtain timely legal advice that would have enabled the FCA to make the decision as to whether Collateral required regulation?
The majority of the investment in Collateral occurred after the 12 month statutory limit had expired. If the FCA had complied with the statutory limit then either most of the investment would not have happened or the FCA would have worked with Collateral to ensure that its business practices met the required standard, consumers would have been protected.
Why did the FCA knowingly disregard the explicit legal requirement of Section 55v FSMA?
Why did the FCA not obtain the necessary legal advice in a timely manner?
Why did the FCA not follow its published policy of prioritising firms that pose a higher risk to its objectives?
Complaint. If the FCA had followed the law (Section 55v FSMA) Collateral would have been stopped trading far earlier, long before the bulk of investment was made. The FCA compounded their breaking of the law by failing to take the necessary legal advice in a timely manner.
The implication for me is that I continued to invest and therefore unknowingly continue make unregulated investments. This has resulted in further losses to me. The FCA has again directly caused my losses.
The FCA discovers the invalid IP Register entry.
20 months after Collateral had lodged its Part 4A the FCA performed a simple check and realised the IP Register entry to be false. Ref. Letter from the FCA to Lord Myners dated 7 November 2019, reference HL120.
data.parliament.uk/DepositedPapers/Files/DEP2019-1063/FCA_response_Myners_HL120.pdfThe ‘discovery’ was made on 23/11/2017 Ref. FOI6297
The FCA CEO was informed on 9th December 2017 Ref. FOI6483.
Investors were not informed at this time and never were.
The FCA did not put Collateral or its directors on its ‘Warning list of Unauthorised firms and Individuals’ Ref. FOI6346.
Collateral continued to trade and took in a further £3.8m of retail investors’ money.
It took a further 2 months for the FCA to decide that Collateral required regulation.
At this point the FCA asked the Directors of Collateral to cease regulated activities.
The FCA removed the false entry from the IP register and allowed the changed entry to lapse.
The FCA obtained freezing orders 6 weeks after asking Collateral to cease regulated activities.
Between the time that the FCA asked Collateral to cease regulated activities and the freezing orders being made approx. £1.5m appears to have been misappropriated.
Why did the FCA not notify investors?
Why did the FCA allow Collateral to continue to offer unregulated / unauthorised regulated investments when they knew that Collateral was trading without permissions?
Why did the FCA leave Collaterals false entry on the IP Register in place when they knew it to be false?
Why did the FCA choose to expose consumers to activity that they knew to be potentially illegal?
Why did the FCA rely on the Directors of Collateral to notify consumers and not check that this had been carried out?
Why did the FCA change the IP Register secretly?
Why did the FCA wait for 6 weeks before obtaining freezing orders?
Why did the FCA not protect consumer’s cash?
Complaint. The text above shows a long series of actions that the FCA took that not only failed to protect consumers (one of its primary objectives) but which actively damaged them. In informing the FCA CEO it shows the seriousness of the situation was appreciated yet it appears that the FCAs taken actions in response were to limit damage to itself.
As an example of the damage to consumers my wife’s account was opened after the FCA had discovered the error in the IP register. She would not have opened the account if the FCA had issued a warning. I continued to invest right up to the day that the Collateral Directors closed the site. Yet again the FCA are directly responsible for our losses.
Data loss
The Collateral website and databases were set up and run by a company called White Feather Designs Ltd.
Investor and Company data was “decommissioned” beyond reach or destroyed.
The FCA initiated a disorderly collapse yet failed to protect vital information.
Why did the FCA fail to protect vital records?
Complaint. Either through a lack of thought or interest the FCA allowed vital records to be destroyed. The FCA did not take timely action to have freezing order placed on the Directors. In both instances the lack of timely action by the FCA has cost consumers dearly. Cash that should have been in the client account was misappropriated and the administrators have spent a very large sum of investors money in an attempt to retrieve the records.
The implication for me is that money that I could reasonably have expected to be returned by the Administrators has either gone missing or has been spent by the Administrators. The lack of timely action by the FCA is again directly responsible for my losses.
As illustrated throughout this document the FCA are directly responsible for the losses sustained by myself, my wife, my Ltd Company and by other investors.
I am fully aware that the FCA will argue that the Complaints Procedure is not the appropriate forum for compensatory payments and that ‘other avenues’ should be explored.
The FCA in their initial statement stated “In fact, none of the Collateral Companies held any valid authorisation or permission to carry on regulated activities.” This of course closes the regular doors for compensatory payments that can be made for regulatory failure.
It is not my intention or place to argue where the compensatory payment should come from.
I will simply point out that PS 13/7 states at 2.31 ‘Regulators Response’ on the subject of ex-gratia payments, “They are calculated on a case-by-case basis and are intended to put a complainant in the position they would have been, had there not been fault on the regulators’ part.”
In consideration of this document and the serious regulatory errors highlighted in it I would expect that this principal is upheld in the case of the regulatory failures that the FCA have been responsible for in the case of Collateral (UK) Ltd.[/quote]