PwC fined £15m by FCA after London Capital & Finance fraud failure

PwC has been fined £15m by the Financial Conduct Authority after it failed to alert the regulator that London Capital & Finance (LCF) might be involved in fraudulent activity.

In the first ever fine issued by the FCA to an audit firm, the watchdog said that PwC had encountered “significant issues” throughout their 2016 audit of LCF, a minibonds firm which took money from almost 12,000 investors before collapsing in 2019.

A senior individual at LCF “acted aggressively” towards auditors, and the firm provided PwC with inaccurate and misleading information, the FCA said.

Following this, PwC suspected fraud within LCF, but did not report it to regulators.

“PwC was duty bound to report those suspicions to the FCA as soon as possible, but they failed to do so,” the City regulator said.

However, the FCA said in a warning notice that it does not hold PwC “directly responsible for the losses resulting from LCF’s collapse”.

This was not the regulatory action that PwC has faced over the collapse of LCF, as in May, the firm reached a £4.9m settlement with the Financial Reporting Council tied to failures over its audit of LCF’s 2016 financial statements.

One of PwC’s auditors, Jessica Miller, was also given a £105,000 sanction. The firm resigned as LCF’s auditor in October 2017, and other auditors such as EY were also fined for their failures in auditing LCF.

Today’s £15m fine is the final outcome in connection to failures relating to LCF, the FCA said.

The Serious Fraud Office currently has an open criminal investigation into the failure of LCF. 

Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “Auditors have a central role to play in keeping our markets clean. They have privileged access to information and they are required by law to report suspicions of fraud to the FCA.

“There were a number of red flags that led PwC to suspect fraud. They should have acted on them immediately. Their failure to do so deprived the FCA of potentially vital information.”

A PwC spokesperson said in a statement: “We have reached a settlement with the FCA to resolve an unintentional reporting breach.”