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FCA Fines PricewaterhouseCoopers £15 Million for Failing to Report Suspected Fraud

In August 2024, the Financial Conduct Authority (FCA) issued a £15 million fine against PricewaterhouseCoopers LLP (PwC) for its failure to report suspected fraudulent activity during its audit of London Capital & Finance plc (LCF) in 2016. PwC identified red flags suggesting potential fraud but did not alert the FCA as required under financial regulations. This fraud-related oversight contributed to LCF’s eventual collapse in 2019, which led to significant financial losses for bondholders, many of whom have only been partially compensated.

Key Findings:

  • PwC audited LCF’s financial statements for 2016 during a period when LCF issued minibonds worth £9.95 million. The company was raising money from the public, claiming the funds were being loaned to corporate borrowers.
  • During the audit, PwC encountered major challenges, including LCF’s refusal to provide basic financial information and aggressive behavior from senior LCF executives.
  • PwC had suspicions about fraudulent activity but failed to report them promptly to the FCA as required by Section 342 of the Financial Services and Markets Act.
  • After LCF’s collapse, it was revealed that many of its corporate borrowers were unable to repay their loans, leaving 11,625 bondholders exposed to losses of £237.2 million.

Penalties and Consequences: 

PwC’s breach was deemed serious but not reckless. The firm was fined £15 million but was not directly blamed for LCF’s misconduct. The case highlights the crucial role auditors play in detecting and reporting irregularities in regulated firms to protect consumers from financial harm.

This ruling emphasizes the importance of timely reporting of suspicions, especially in high-risk financial firms. Auditors must uphold their duty to ensure transparency and accountability in financial audits.

For further details, you can read the full FCA notice.

About Michael Rasmussen

Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.  

Michael is also the founder of FinProLaw, an online learning platform where Michael has created courses designed for investment adviser compliance professionals. These courses include: 

  • Investment Adviser Compliance Essential for Chief Compliance Officers 
  • Foundations of Investment Adviser Compliance 
  • What is a “Security”? 
  • Investment Adviser Marketing Rule 
  • Regulation A – Exemption from Registration 
  • Regulation Crowdfunding – Exemption from Registration 
  • Regulation D – Exemption from Registration 

Michael can also be found on LinkedIn.

Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw to learn more.