EY and PwC face investigation over London Capital & Finance audits
25 Jun 2020

Three auditors which signed off the books of collapsed savings firm London Capital & Finance (LCF) are being investigated by the accounting watchdog.

Big Four accountants EY and PwC and smaller rival Oliver Clive & Co will face questions from the Financial Reporting Council (FRC) over why no warning signs were spotted before LCF went bust last year, leaving 11,600 investors facing losses of up to £237m.

Administrators later found that customers’ money had been spent on a riding stables, a helicopter and what they termed “highly suspicious” property developments in the Cape Verde islands.

The three auditors signed off LCF’s accounts between 2015 and 2017.  EY and PwC oversaw a set of annual results in 2016 and 2017 respectively, while London-based Oliver Clive audited the company for a month in April 2015.

The investigations will be conducted by the FRC’s enforcement division, which has the powers to issue fines and ban auditors from the profession.

LCF sold mini-bonds to ordinary investors and lent the money on to a string of companies, earning interest that it used to pay bondholders.

It went bust in January 2019, triggering what is believed to be the biggest City savings scandal since the collapse of Barlow-Clowes in 1988.

The failure sparked widespread criticism of the Financial Conduct Authority watchdog (FCA), which is meant to protect consumers and was at the time run by Bank of England Governor Andrew Bailey.

A report into the collapse will come out nearly three months late due to delays caused by the regulator and problems triggered by the pandemic.

The inquiry, led by former appeals court judge Dame Elizabeth Gloster, has been forced to push back the publication of its findings after interviews with FCA employees were delayed.

Mr Bailey will himself be interviewed as part of Dame Elizabeth’s investigation.

Both the FCA and the Serious Fraud Office are investigating individuals and companies connected to LCF.

By Simon Foy, The Telegraph, 24 June 2020

Read more at The Telegraph

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet

FREE CPD Wallet