Calls for an investigation into the Financial Conduct Authority’s (FCA) handling of the WealthTek scandal have been made by a number of prominent Conservative politicians.
The MPs, led by Shadow Business Secretary Kevin Hollinrake and Tory leadership hopeful Tom Tugendhat, have written to Chancellor Rachel Reeves pointing to “deeply concerning allegations” that the financial services watchdog did not act on whistleblower claims of potential fraud.
In his letter, which also includes signatories David Davis and Andrew Mitchell, Mr Hollinrake says it is important the allegations are investigated and if there has been a failure, that a compensation scheme should be set up.
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Tyneside-based wealth management company WealthTek was closed down by the FCA in April last year amid concerns about fraud and money laundering.
The firm was placed into special administration with subsequent investigations uncovering a financial black hole of about £80m, made up of an asset shortfall of £70.7m and a client money shortfall of £9.7m. Wealthtek did not have permission to hold client money or custody assets, the regulator said.
The FCA told a court earlier this year that the suspected misconduct of WealthTek founder John Dance is potentially “one of the largest frauds perpetrated by an FCA regulated individual at an authorised firm”.
Mr Hollinrake’s letter follows public testimony of whistleblower Gary Stockdale, formerly an analyst at WealthTek between 2011 and 2021, who first took his concerns to the regulator in 2021 and was subsequently asked to fill out a questionnaire.
While the FCA is now conducting a criminal investigation into WealthTek and Mr Dance, a judge recently approved plans to return client money and assets – which have been frozen since the firm was shut down.
The task of identifying what the 1,323 former clients are owed is said to have been made difficult by issues with the accuracy of WealthTek’s books and records. Mr Hollinrake said he and the other MPs have constituents who have suffered significant financial distress amid the scandal and are “urgently awaiting answers”.
An FCA spokesperson said: “After identifying potentially criminal activity at WealthTek, we acted to protect investors. We recognise people’s concern and have tried to keep them updated as much as we can. However, given an ongoing criminal investigation, there are limits on how much we can say.”
The Financial Services Compensation Scheme has estimated its commitment to compensating former WealthTek clients will stretch to about £40m, including money transfer costs.
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