A cross-party parliamentary group has warned that the UK’s financial conduct regulatory framework is fundamentally flawed, urging Parliament to reclaim a stronger role in overseeing the system.
According to Financial Reporter, the report, published by the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services (APPG), spans more than 250 pages and argues that the UK’s regulatory structure is in urgent need of comprehensive reform.
The group is calling on the government to conduct what it describes as a “full, root-and-branch review” of the country’s financial conduct regulatory architecture.
Drawing on a broad range of evidence, the study compiles findings from a large public survey, more than a decade of parliamentary debates, expert reviews of the Financial Conduct Authority (FCA), and testimony from victims of financial misconduct and whistleblowers. The analysis also examines patterns emerging from a series of high-profile financial scandals that have affected consumers in recent years.
According to the APPG, these incidents reveal systemic issues rather than isolated failures. The report concludes that the repeated emergence of scandals reflects structural weaknesses within the existing regulatory framework. In its assessment, recurring failures across the sector point “not to isolated regulatory mistakes but to systemic flaws in the regulatory architecture itself”.
The group also warns that the government’s current “deregulate for growth” strategy could intensify these problems. It argues that loosening regulatory requirements risks undermining already fragile consumer protections at a time when evidence suggests those safeguards remain insufficient.
To address what it describes as deep-rooted structural issues, the APPG recommends establishing a Royal Commission into UK financial conduct regulation. Such inquiries are among the most powerful forms of independent public investigation available within Commonwealth countries including the UK, Australia and Canada. A Royal Commission has the authority to compel witnesses to provide evidence under oath and to gather extensive documentation while delivering policy recommendations to government.
The report suggests that only a Royal Commission would have the scope required to conduct a comprehensive review of the UK’s financial regulatory structure. The APPG points to Australia as an example where a similar inquiry led to significant reforms across the financial services industry.
John McDonnell MP, chair of the APPG, said, “This report brings together one of the most comprehensive bodies of evidence ever assembled on the failures of financial conduct regulation in the United Kingdom.
“Scandal after scandal has been treated as an isolated event, yet the same warning signs are ignored, the same regulatory failures occur, and the same devastating consequences are suffered by ordinary people. That is not coincidence – it is the product of structural weaknesses in the system Parliament created.
“The evidence presented here makes the case for a Royal Commission, or something similar, that can undertake a genuine root-and-branch review of financial regulation. Parliament must reclaim its role in defining what fairness means in financial services and ensure that the institutions responsible for protecting consumers are not just capable of delivering it, but are also motivated to do so in an unconflicted manner.
“We must also be clear that weakening consumer protections will not deliver growth. It will deliver more scandals, more victims, and deeper distrust. A strong regulatory framework is not the enemy of economic success – it is one of its essential foundations.”
Andy Schmulow, associate professor and volunteer member of the APPG secretariat, said, “The catalogue of consistently poor conduct regulation performance in the UK is akin to what happened in my own country of Australia, where we eventually decided a structural overhaul of the regulatory framework was needed, by way of a Royal Commission.
“Whether Brits have a Royal Commission or use some other Parliamentary device is a matter for discussion; but what isn’t a matter for discussion is the need for an holistic, macro, tenacious endeavour to properly fix what’s wrong with your conduct regulation. If anybody’s in doubt of that, read the APPG’s report – the evidence from a wide range of stakeholders couldn’t be more conclusive.
“I recall the current CEO of the FCA responding to a question I once put to him about what the FCA was doing to combat the risk of regulatory capture. His response convinced me that financial conduct regulation in the UK is in need of as much scrutiny and accountability as Australia’s – you’ve got exactly the same structural issues that we have been wrestling with.
“It is noteworthy that prior to the establishment of Australia’s Royal Commission, the banks and their lobbyists, sections of the media and civil society, and the then Turnbull-Abbot government argued forcefully that a Royal Commission was not needed, would produce no discernible results, would be superfluous to the at least six major inquiries that had already been conducted into industry misconduct, would be a waste of money, would scare away investors, would lead to a diminution of trust in the industry in the minds of the public, would place an unnecessary administrative burden on regulated entities, would be excessively costly to the taxpayer, and so on.
“But in the aftermath of our Royal Commission, those who had opposed it uniformly agreed that the inquiry had been necessary, sobering, and cathartic.”
The report ultimately concludes that without structural reform, the UK risks continuing a cycle in which scandals emerge, regulatory failures are acknowledged, and incremental fixes fail to address the deeper systemic causes.
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