Harsh criticisms of the Gambling Commission and the FCA in Parliamentary debate on the collapse of Football Index

On 7 June 2022, a Westminster Hall debate (opened by Labour MP Liz Twist) took place on the subject of the impact of the collapse of Football Index. We have previously reported extensively on this subject-matter, including in our posting entitled ‘Football Index operating licence suspended (plus a summary of what led up to that & what has happened since)’.

Predictably, comments made by MPs of all political parties during the Football Index debate contained very harsh criticisms of both the Gambling Commission and the Financial Conduct Authority. Examples include the following:

Liz Twist MP:

The Gambling Commission and the Financial Conduct Authority should have stepped in long before they did …. On 17 May, I wrote to the Minister about the experiences of my constituents, and fortuitously, I received a response to my letter yesterday by email. The Minister noted that the Gambling Commission and the FCA have acted on the recommendations of the Sheehan report, so there is clearly a recognition that there was a failure in the regulation of the product. It is clear that the regulators have failed many people …

Clive Lewis MP:

… the regulatory framework …. comprehensively failed my constituents, many of whom have been suicidal. The collapse has led to them losing their homes or their businesses. The FCA failed them, Football Index failed them and the Gambling Commission failed them.

Aaron Bell MP:

I draw the attention of the House to my entry in the Register of Members’ Financial Interests, and let people know that I worked for Bet365 for 15 years before I came to this place. I have long experience of the Gambling Commission, and while I was in that role, it was frequently behind the curve and asleep at the wheel, which is one of the accusations levied at them regarding Football Index …. the Gambling Commission failed to identify the key features of the product, which then changed while Football Index was running it, and the Gambling Commission did not seem to notice. Andrew Rhodes, who I believe is a good man—I will come to that in a bit—said in his response that the Gambling Commission does not believe it licensed a Ponzi scheme. That may not be the case, but he also said, “BetIndex was not recruiting enough customers to compensate for depleting its financial position” — as it did by increasing the dividends — “and ultimately collapsed as a result.” If such a company is not recruiting enough customers to pay out the ones it already has, that looks like a Ponzi scheme to me …. I believe that the new CEO of the Gambling Commission, Andrew Rhodes, understands the problems that occurred in the past. I met him in February to discuss this case and my overall experience with the sector. I think he accepts that mistakes were made repeatedly under the previous leadership of the Gambling Commission. I wanted to put that on the record …

Jessica Morden:

There are serious questions for the FCA to answer. It twice stated that the product fell within its regulation, yet seemingly changed its mind.

Sarah Green MP:

… the Gambling Commission did not have a firm grip of what it was licensing. Football Index managed to slip through the cracks between the Gambling Commission, the FCA, the Advertising Standards Authority and other bodies. The nature of the product meant that nobody was really sure who was responsible for regulating it, so nobody took full responsibility. While the Gambling Commission and the FCA sat on their hands, deciding how to deal with this new and unfamiliar product, vulnerable consumers were falling victim to Football Index’s misleading product and losing life-changing sums in the process.

Alison Thewliss MP:

It was batted back and forth between the Gambling Commission and the FCA and, in a clear case of regulatory failure, neither was willing to take full responsibility for a product that should not have been licensed if nobody quite understood what it was for.

Ruth Cadbury MP:

The Gambling Commission took over a year to withdraw the licence and say that Football Index’s product was an exceptionally dangerous pyramid scheme under the guise of a football stock index. By submitting a written question to Ministers, I found out that it then took over a year for the Gambling Commission to warn the Department for Digital, Culture, Media and Sport. It was not until 10 March 2021 that a letter went from the Gambling Commission to DCMS. In that year, a gaping black hole existed, and through that black hole went the hard-earned savings of my constituents and those of many others. Millions of pounds went down that black hole.

Mick Whitley MP:

Few have been quite as tone-deaf as the chief executive officer of the Gambling Commission, Andrew Rhodes, who had the temerity to lecture victims still coming to terms with their losses by saying that “no one should gamble more than they can afford to lose.” In fact, Rhodes and the commission he oversees still have serious questions to answer about their role in this whole saga, because if this is a story about unchecked greed, it is also a story of chronic regulatory failings. The Gambling Commission issued a licence for a product that it did not understand, and ordinary customers were forced to pay the price. Despite receiving warnings about systemic flaws with the index in January 2020, it was not until May 2020 that the commission began investigating …. The simple truth is that thousands of Football Index consumers were failed by the very people who were supposed to protect them.

Patricia Gibson MP:

The Gambling Commission failed to carry out due diligence, and consumers have paid very heavily for that failure. How is that fair? Why should unsuspecting customers pay for that failure? Clearly, the Gambling Commission’s conduct and competence was not what it needed to be, and its regulation and effectiveness of enforcement was not fit for purpose. One of the many lessons to learn from that is that we must have a gambling ombudsman, to ensure that consumers have a clear avenue for redress. Those who were caught up in the Football Index scandal and lost a lot of money have been failed at every turn by the very regulation that is supposed to protect them.

Ben Lake MP:

I associate myself with the comments of the hon. Member for North Ayrshire and Arran (Patricia Gibson), in which she completely demolished the regulators by outlining the failure to prevent this crisis.

Ronnie Cowan MP:

Football Index is a scandal that underlines the need for wholesale reform of the gambling industry and raises significant questions about the Gambling Commission, given that it saw fit to license the platform and failed to enact adequate oversight. In the regulated sector, when people gamble they should have confidence that they are doing so on the basis of the outcome of a wager. It should not be a gamble on the solvency or sustainability of the licensed operator. This scandal shows how much a gambling ombudsman is needed to ensure that consumers have a clear avenue for redress in circumstances such as the Football Index scandal …. BetIndex Ltd was approved and operated a licence authorised by the Gambling Commission. The failure is on the regulator as much as it is on the Ponzi scheme that stole consumers’ cash. The Government should be doing more to protect their citizens and should act swiftly when they have let them down. The ex-CEO of Football Index, Adam Cole, has been named persona non grata by the Jersey Gambling Commission, with the regulator citing the executive’s track record as the reason for its decision. While the Jersey Gambling Commission has stepped up, there are no immediate plans for the UK Gambling Commission to act.

Jeff Smith MP:

It is clear that there has been a massive failure of regulation. When the Government commissioned their report on the collapse, there were concerns among those affected that the review did not sufficiently interrogate or challenge the Gambling Commission’s explanation of events, and I would be grateful to hear the Minister’s comments on those concerns. Nevertheless, the report identified clear failings: BetIndex did not properly notify the Gambling Commission of the nature of and changes to the product in its licensing application; the Gambling Commission responded slowly to the challenges raised by the product; and the Financial Conduct Authority could also have done more to help …. Many have called for the creation of an ombudsman to get redress for Football Index’s victims. The Opposition think that the Government should look seriously at that useful proposal.

A speech made by DCMS Under-Secretary of State, Nigel Huddleston MP, responding for the Government in the absence of the Gambling Minister, Chris Philp, included comment in relation to the independent report of Michael Sheehan QC into the regulation of Football Index. Extracts from Mr Huddleston’s speech included the following:

We are grateful to Mr Sheehan and his team for their extensive investigation, thorough report and clear recommendations, which we have welcomed. The review highlighted a number of wider factors relevant to the way in which this situation came about, including the actions of BetIndex and the impact of covid, as I have mentioned, but it also identified areas for improvement for both the Gambling Commission and the FCA. Areas for improvement have been highlighted by several hon. Members today. As my hon. Friend the Member for Croydon South said in his written ministerial statement in September last year, the report identified areas where the commission could have been more effective in responding to the challenges raised by the novel product — Football Index — including earlier scrutiny and the speed of decision making.

Although BetIndex was not regulated by the FCA, the report also looked at the FCA’s role in working with the commission, and identified some areas for improvement, including the speed of response to the commission’s requests. I am pleased that both bodies have acted on the recommendations to ensure that a similar situation does not happen again. That is a key ask from many Members today. Actions have included such things as the Gambling Commission updating the way in which it assesses risk so that novel products are properly considered; and the commission publishing a consultation on changes to its licensing policy, clarifying that it will not normally grant a licence to products that contain language associated with financial products or which require dual regulation …

… Going back to the changes made as a result of the recommendation, the Gambling Commission and the FCA are also signing a strengthened memorandum of understanding to improve co-operation, and the FCA has nominated an executive director to oversee its relationship with the commission. Therefore, some changes have already happened and others are happening now.

Even though the independent report has been published, other processes are ongoing. First, administration proceedings continue, which may result in some money being refunded to customers. Secondly, the Gambling Commission referred BetIndex to the Insolvency Service and asked it to consider whether the actions of BetIndex’s directors prior to administration breached insolvency or fraud laws.

… With regard to compensation, as I have said, there are procedures that we cannot move from. It is also very clear that we strongly sympathise—everybody strongly sympathises. As a constituency MP, I also have constituents who have been impacted by the collapse and who have lost money. We have heard today anger and frustration about the genuine hardship—both financial and, of course, mental—caused by the collapse. However, we do not think it would be appropriate for the Government to use public funds to cover losses to individuals resulting from the collapse of a gambling company. Consumers staking money on gambling is not the same as their placing money into other things, such as savings products. Furthermore, the Gambling Commission does not have any statutory powers that would enable it to offer redress for losses suffered as the result of a gambling operator collapsing.

… On the Insolvency Service investigation, BetIndex entered into administration on 26 March 2021 and administrators are required to report to the Insolvency Service on company directors’ conduct. Following information received from the administrators and the Gambling Commission, the Insolvency Service has confirmed that it is investigating the conduct of BetIndex’s directors.

… Please be in no doubt of the seriousness with which the Government take all the matters that have been highlighted today, and the gambling review will indeed be announced in the coming weeks.

You can read the full Hansard transcript here and view the debate on Parliamentlive.tv here.

Note also that, in advance of the debate, the House of Commons Library published (on 25 May 2022) a briefing paper entitled ‘The Football Index Collapse – a Timeline’, a copy of which you can download below.

It can confidently be expected that debate will continue on consequences of the Football Index collapse once the forthcoming Gambling Act Review White Paper has been published.

NOTE: We have reported separately on the Westminster Hall debate on the question of a Statutory Gambling Levy to fund problem gambling research, education and treatment, that took place earlier during the day on 7 June 2022.