I rise to support the Bill, but to suggest that there are wider issues to be considered from the scandal behind it. In particular, I suggest that there are disturbing echoes of Dame Elizabeth Gloster’s report in how the demutualisation of Liverpool Victoria is being considered by the same regulators, and that there is an urgent need to tighten up some major legal loopholes.
The focus of the Financial Conduct Authority’s interest to date in LCF and Liverpool Victoria is very different. LCF was selling, or rather mis-selling, a distinct product. With Liverpool Victoria, the issue is whether it should be allowed to hand over all the capital and assets its British customers have helped it build up over almost 200 years to a privately owned American firm with no commensurate experience, and whether the choices of consumers past and present are being respected. I understand that regulators have had a substantial number of meetings with those pushing the demutualisation, but none with the customers and owners of Liverpool Victoria.
Consumers lost thousands with London Capital & Finance. The customers of Liverpool Victoria also risk losing out significantly. Dame Elizabeth’s report questioned whether policy papers and staff training at the FCA were adequate. In the case of LCF, the inability to detect indicators of fraud was the key driver of her concern, but given that the FCA has made no analysis of what happened during previous demutualisations of financial services businesses—whether customers benefited or lost out; whether customers were presented with fair information and given access to alternative viewpoints—it is difficult to see how staff could be trained to protect the consumer interest properly during a demutualisation. Indeed, all the evidence that has been compiled independently suggests that demutualisations result in worse services for consumers.
It is clear that Dame Elizabeth thought that the FCA was not fit for purpose. It did not protect LCF customers, despite repeated wake-up calls. Similarly, given the complicated nature of financial services businesses, the customers of a financial mutual are not always well placed to make a judgment about whether a vote for a conversion is in their interest; they rely on the advice of others. Customers are not given even-handed information by boards wanting to demutualise—they are certainly not in the case of Liverpool Victoria—to allow them to
make an informed decision. The FCA has a critical role, and it needs to exercise a little more robust direction to the board of Liverpool Victoria. Similarly, legislation for friendly societies needs updating so that it properly protects consumers’ assets and ensures that regulators can properly protect consumers during demutualisations.
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