Investment

Lessons from an investment scandal – Financial Times

Published

4 years ago

December 20, 2020

Low interest rates have been a challenge for savers in much of Europe and the US ever since the financial crisis, tempting many to seek out investments that promise high returns. The natural desire to make money can blind investors to risk — or encourage them to put their savings into products that are not properly regulated by financial watchdogs. That challenge has only been compounded by the pandemic as central banks everywhere have rushed to keep borrowing rates low to keep their economies afloat. The concern is that, faced with the prospect of an extended period of ultra-low or even negative rates, millions more savers will plough their hard-earned capital into speculative schemes.

It is against this backdrop that a long-awaited report into the collapse of British savings company London Capital & Finance should be read. Its conclusions — in particular the revelation of gaping holes in the UK’s financial regulation network — are especially timely. Close to 12,000 consumers lost most of their £236m savings when LCF collapsed into administration in 2019. The company had sold high-risk, unregulated mini-bond investments that promised high rates of interest. Many of the buyers were elderly; some used their life savings to buy the bonds.

The report of the inquiry, led by former judge Elizabeth Gloster, makes for uncomfortable reading for the financial watchdog, as well as for Andrew Bailey, governor of the Bank of England, who was chief executive of the regulator from 2016 until March this year. The inquiry found that the Financial Conduct Authority failed to “effectively supervise and regulate” LCF. The regulator, the report went on, failed to appreciate the significance of “an ever-growing number of red flags”. The report also expressed its “disappointment” at the attempts of certain individuals, including Mr Bailey, to deter the inquiry from singling out individuals.

Consumers are entitled to expect and receive protection from the regulatory regime, in particular when they invest their own savings. Yet one of the most alarming conclusions to be drawn from the LCF report is that neither consumers nor even the regulator’s staff fully understood what is regulated by the FCA and therefore covered by compensation — and what is not. Companies that are authorised by the watchdog can offer unregulated investments.

The FCA has said it accepts all nine recommendations in the report. It is important that these are followed through. They include sensible proposals such as training staff to recognise fraud and irregularities, as well as ensuring that information and data relevant to the supervision of a firm is available on a single electronic system. The FCA should also not reassure consumers about the non-regulated activities of a firm based on its regulated status.

Additional recommendations, however, about regulatory reform could have more far-reaching consequences. They will require careful consideration. Chief among these is that the Treasury should consider the “optimal scope of the FCA’s remit”, citing concerns over the broad scope of the watchdog’s responsibilities and the impact this has on its effectiveness.

Ultimately, regulation on its own cannot guarantee protection for consumers. One of the wider lessons from this scandal is the poor level of investment knowledge of many savers — and the importance of financial education. Against an uncertain economic backdrop as countries recover from the effects of the pandemic, understanding financial investment choices matters more than ever.

Let’s block ads! (Why?)

Source link

Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

Source link

Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link

Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link