A major new report from the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services (APPG) has urged Parliament to reassess the foundations of the UK’s financial regulatory framework, warning that the current system governing conduct oversight is fundamentally flawed.
According to Financial Reporter, the 250-page report argues that lawmakers must “reclaim its role” in shaping the direction of financial regulation, concluding that the country’s framework for supervising financial conduct is in urgent need of structural reform.
According to the APPG, the problems facing the system are not limited to isolated incidents but stem from deeper weaknesses embedded in the regulatory architecture itself.
Drawing on a broad body of evidence, the report compiles findings from a nationwide public survey, a decade of Parliamentary debates, independent reviews assessing the performance of the Financial Conduct Authority (FCA), and testimony from both victims and whistleblowers. It also includes analysis of several financial scandals that have shaken confidence in the UK’s oversight regime.
The APPG warns that the government’s current policy approach of “deregulate for growth” could risk worsening these systemic problems. According to the report, weakening consumer protections in pursuit of economic expansion may create conditions that allow further misconduct to occur, particularly when existing safeguards are already viewed as inadequate.
Rather than being a series of unrelated failures, the report argues that recurring scandals highlight a deeper structural issue in the way financial regulation is organised and enforced. The APPG states that repeated breakdowns across different cases demonstrate that the underlying system itself requires comprehensive reform.
To address these concerns, the parliamentary group has proposed establishing a Royal Commission into UK financial conduct regulation. Royal Commissions represent one of the most powerful forms of public inquiry within Commonwealth countries such as the UK, Australia and Canada. They operate with significant investigative authority, including the ability to summon witnesses under oath, compel evidence and deliver policy recommendations, although they cannot pursue criminal prosecutions.
The APPG believes that only an inquiry with such extensive powers would be capable of examining the full scale of the structural challenges identified in the report. The group points to Australia’s experience with a Royal Commission into misconduct in the banking sector as an example of how such investigations can drive significant reform.
APPG chair John McDonnell 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.”
Associate professor Andy Schmulow, a volunteer member of the APPG secretariat, added: “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 APPG report ultimately argues that restoring public trust in financial services will require a deeper reassessment of how the UK defines fairness, accountability and consumer protection within its regulatory system.
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