The head of the UK financial regulator has promised to consider imposing restrictions on a system that allowed the now collapsed bank Greensill Capital to operate in the UK without a licence.
Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), told MPs that Greensill’s failure had led the regulator to look “much more closely at the systems of control that the principle has in place and potentially also plac[e] some restrictions on the scale of business that can be undertaken through this mechanism”.
Greensill was able to do some of its business by piggybacking off US-based Mirabella Advisers, which is licensed in the UK. It meant Mirabella had the responsibility to ensure that Greensill was playing according to the rules, while Greensill was not regulated by the FCA.
Rathi has said the FCA was “formally investigating” the circumstances leading to the the bank’s collapse, and said that some of the allegations facing Greensill were “potentially criminal in nature”.
“We are also cooperating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions,” Rathi added in a letter to the select committee released on Tuesday.
He was speaking to MPs on parliament’s Treasury select committee to answer questions about the FCA’s oversight of Greensill.
David Cameron, the former prime minister who was employed by Greensill and owned an undisclosed stake in the company, is due to appear before MPs on the committee on Thursday.
Rathi said the appointed representative system was launched in the 1980s to allow small, self-employed providers to be freed from the requirement to get a licence and be overseen by the regulators.
“It’s evolved over time. I certainly don’t think it would be proportionate for the FCA to supervise a sole trader that’s selling insurance in their local market, or a self-employed mortgage broker … and that’s what the regime was designed for,” he said.
“It’s moved into much more complex areas, and it’s quite liberal in terms of the range of activities an appointed representative can undertake … Basically, everything other than deposit taking and managing investments.
“That feels to me like we need to be looking much more closely at the systems of control that the principle has in place and potentially also placing some restrictions on the scale of business that can be undertaken through this mechanism.”