In the Eye of the Storm

We hear that the Fund has made another appearance in the iconic British investigative magazine Private_Eye. Labeled, not unreasonably, ‘FRAUD’, and carrying the punning headline ‘All a big Con-naught’, the report outlines the nature of the scam, reports on the backgrounds and impossible positions of the principals of Connaught, and also demonstrates how the (in)actions of Capita, BDO and the FSA made the fraud possible.

We imagine that difficult questions are being asked in the boardrooms of these organisations as a result of the publicity, and hope that those who failed investors decide to make amends. All it needs is the regulator to call in the head honchos of Capita and BDO and give them a choice between making good investors’ losses and losing their FSA permissions.

When the Hector Sants became Chief Executive of the watchdog in 2009, he opined that ‘people should be very afraid of the FSA’. We assume when he said ‘people’ he meant ‘companies and individuals on the FSA Register’ and not ‘investors’ and that the objective survived his departure last summer. So far, we can’t be sure. We know that the FSA knew about catastrophic losses and wrongdoing in Tiuta, a regulated entity, almost two years ago but allowed it to continue to trade. Even today, the Action Group knows more about what happened than the regulator, despite having been on the case for just five months and having minimal resources and no statutory powers.

We hope the FSA will make good on hapless Hector’s threat by using the powers available to it to leave Capita and BDO in no doubt that if a single investor loses so much as a dime in interest or capital, they shouldn’t expect to be able to continue undertaking regulated activities. And we see no reason why it should not do it now.