FWIW, the following is the text of my previous complaint about the FCA (originally posted
here)
Brief details of your complaint:
My complaint relates to the FCA's full authorisation of L**** Ltd. (now in administration). I have got £xx,xxx still held in secured property investments via L****, which are gradually being sold off by the administrators - generally for a fraction of the original RICS valuation. As a retail investor I relied on the FCA's full authorisation as evidence that L****'s operations were compliant with the law and with good practice. Clearly they were not.
[NOW PAST TENSE:] There is ongoing legal action brought by lenders (as the L**** Action Group), challenging the waterfall of payments which puts L****, in administration, ahead of lenders. This is clearly not equitable - and more to the point should never have been permitted as per legislation.
Default interest clauses contained in the loan contracts, unknown to lenders, greatly inflate the proportion of recoveries due to L****.
Furthermore, L**** changed its terms and conditions to its own financial advantage, forcing these changes on lenders who were locked into using the platform.
The FCA permitted terms and conditions which were to the disadvantage of lenders because of the undisclosed loan contract terms. Furthermore the FCA permitted the amended terms to be imposed on lenders when there was no mechanism for lenders to exit most loans, and allowed them to be applied retrospectively to old loans.
[NOW PAST TENSE:] It should not be necessary for lenders to challenge the waterfall though the courts. This has only become necessary due to a lack of action by the FCA.
There is further legal action being taken against the company founders, T** G***** and L*** B*****, for allegedly misappropriating nearly seven million pounds via offshore companies (ref. L**** Ltd vs B***** and Ors, England and Wales High Court Chancery Division 2 June 2020).
L**** materially misled investors on a number of important points, including -
(1) Stating that provision for winding down the loan book had been made while the company was operational, and that finance was in place for it
(2) Declaring lenders' capital, loaned to borrowers, on its own balance sheet
(3) Conflating Loan to Value (LTV) and Loan to Gross Development Value (LGDV)
(4) Failing to disclose that many of the borrowers were linked (i.e. many loans being made to companies controlled by the same person)
(5) Stating that funds were ring fenced when no such legal protection existed
In choosing to invest money with L****, I and other investors did, ostensibly, all the right things. I trusted L**** because -
(1) It was UK based and therefore subject to UK law
(2) It was traceable (with named individuals in charge, and a physical office in S*******)
(3) Investments were physical property assets
(4) These properties all had RICS valuations
(5) Personal guarantees were, according to L****, in place in many cases
(6) 'LTV' (or LGDV, depending where you looked) never, according to L****, exceeded 70%
(7) It was authorised by the FCA therefore should have been verified to be operating legitimately, fairly and lawfully
Brief details of the steps you have taken so far to try and resolve the matter (including any compensation received to date):
Followed developments via L**** Action Group and P2P forums
Contributed to crowdfunding for legal action to challenge waterfall distribution
Written to my MP, xxx
Misconduct alleged:
1. Failure to exercise the necessary diligence and skill in assessing L**** as part of the authorisation process
2. Failure to challenge unlawful actions such as the unfair terms and conditions imposed on lenders
3. Failure to take action during the administration to prevent application of the waterfall which is to the clear and substantial detriment of lenders
Lord Myners has stated that the issue of L**** should be looked into by a panel of experts in a process led by a High Court judge. He said that the FCA’s authorisation of L**** gave it “a sense of regulatory approval and endorsement, which encouraged people to feel they had been vetted,” and “The FCA should, in my view, have been more alert.”
Remedy sought:
Full financial compensation for any shortfall in returned funds on completion of the administration process.
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Another point I would make is that the FCA cannot be sued for libel or damages unless it can be shown it has acted “in bad faith” or unlawfully. In his letter to Lord Myners, Andrew Bailey explained that full authorisation was given despite concerns and ongoing remediation, on the basis that this would give the FCA more power to ensure that the remediation progressed and therefore lead to a less bad outcome. It may be argued that this was a bad faith action for those who had not yet become lenders but did so (or existing lenders who advanced more funds) as a result of the endorsement provided by full FCA authorisation.
