The Financial Conduct Authority has received a complaint against the terms of its review into its handling of the Connaught collapse in 2012, which lost investors £118m.
The Connaught Income Fund Series 1 was an unregulated collective investment scheme run by operators Capita Financial Managers and Blue Gate Capital from March 2008, providing short term bridging finance to commercial operators in the UK property market.
The fund went into liquidation in December 2012, with investors losing £118m in three versions of the Connaught funds when they collapsed.
In June, the regulator announced that it commissioned barrister Raj Parker to lead an independent review into its own actions and those of its predecessor, the Financial Services Authority, in dealing with the fund and its operators between February 2007 and March 2015.
But in a letter sent to the regulator sent on July 11, seen by FTAdviser, Mark Bishop, from the Connaught Action Group, calls into question the remit of the review and Mr Parker’s independence.
Mr Bishop noted since the review excludes all events subsequent to March 10, 2015, it will disregard input from Connaught’s liquidators, the chair of its All-Party Parliamentary Group, and other relevant stakeholders.
Regarding Mr Parker’s appointment as an independent reviewer, Mr Bishop noted that he has been a solicitor for almost his entire career, serving for more than 30 years at Freshfields Bruckhaus Deringer.
He noted that "given the number of FCA employees whose conduct is likely to be examined in the review who may also have worked at Freshfields, there must be a risk that he is conflicted".
In particular, Mr Bishop referenced Nausicaa Delfas, a member of the FCA’s executive committee, who spent the first eight years of her career at the firm, all of them at the same time as Mr Parker.
In his complaint - which was also sent to John Glen, economic secretary to the Treasury, and Nicky Morgan, chairwoman of the Treasury committee – Mr Bishop proposed a series of remedies, which include the publication of a revised remit for the review.
He is also demanding a full conflict check into the proposed reviewer, and depending on the extent of any conflicts revealed, the appointment of a joint or replacement reviewer.
The FCA said: "We are satisfied that the terms of reference will enable the independent reviewer to identify any failings in the supervision of Connaught and that he has no conflict of interest."
The review follows a complaint made to the FCA’s watchdog, the Complaints Commissioner, into the regulator’s role in the fund’s failure in 2016.
The Complaints Commissioner found the FCA had "shifted the focus" away from its regulatory failings onto advisers who sold Connaught funds to their clients.
The FCA previously found there were "serious issues" which arose during the tenure of Capita Financial Managers as operator of the Connaught Income Fund Series 1 and that Capita failed to ensure its replacement was fully informed about these.
