One of Britain's top financial regulators has apologised for failing to catch one of the biggest investment collapses in the last decade — but defended her decision not to quit.
Megan Butler, executive director for transformation at the Financial Conduct Authority (FCA), was one of three regulators named and shamed in a damning report last year into the collapse of London Capital and Finance (LCF). The investment business collapsed at the start of 2019 after raising £237m ($324m) from 11,000 small-time savers. The Serious Fraud Office is investigating and former FCA chief Andrew Bailey has called it a "suspected fraud."
Butler, who was in charge of FCA supervision at the time, appeared before parliament's Treasury Select Committee on Thursday to answer questions on her role in the debacle.
Butler said she had "sincere regret for the losses suffered by bondholders” and had a “great deal of sympathy" for them.
"I entirely understand their anger and disappointment," she said.
Butler took "full responsibility" for the FCA's failure to supervise LCF effectively.
However, she defended her position. She said she had not considered resigning and did not expect to be asked to leave after reading last year's report.
"I had a number of conversations with the rest of the leadership team but no I didn’t," Butler told MPs.
“This is an issue where, as the board said, there’s a collective responsibility and a collective response... I didn’t expect any other outcome."
Butler has been promoted at the FCA since the collapse of LCF and now oversees a programme of root-and-branch reform aimed at improving supervision. She told MPs she was “striving to improve the outcomes."
“I am so sorry that the changes we were putting in place didn’t come quickly enough to change the outcomes for LCF bondholders but the organisation we have now is not the organisation we had in 2015, 2016, or even 2018," Butler said.
"We have a different supervisory approach and a different organisational approach, importantly, to so many of these issues. I’m just so very sorry it didn’t get there in time to change the outcome for the bondholders."
Earlier this month FCA chief executive Nikhil Rathi was forced to defend the decision to promote Butler. He admitted that Butler was one of only two people to apply for the transformation role but said he believed she was a strong candidate and didn't want to waste time searching externally.
Butler told MPs on Thursday: "I bring to that role 30 years of financial services experience, 20 years of which have been in regulation.”
Jonathan Davidson, another top FCA official in charge of supervision during the LCF era, also gave evidence to the Treasury Select Committee on Thursday. Davidson, who has since left the FCA, was another of the three official's named in last year's report, alongside Butler and former FCA head Andrew Bailey.
“I’ve felt it very deeply and I did ask myself what could I — what could we — have done differently," Davidson said. “It wasn’t good enough.”
He offered his “personal apologies to the bond holders in LCF" and acknowledged the “terrible impact it's had on many of their lives.” Davidson said last year's review into the FCA's supervision of LCF made for “very painful reading.”