LONDON, Dec 17 (Reuters) - Britain’s markets watchdog failed to supervise London Capital & Finance properly before the fund collapsed last year, leaving 11,600 investors facing losses of up to 237 million pounds ($322.25 million), an independent report for the government said. Former high court judge Elizabeth Gloster said the Financial Conduct Authority’s failure was due to “significant gaps and weaknesses” in its practices and policies at a time when it was run by Andrew Bailey who is now the Bank of England’s governor. “The investigation has concluded that the FCA did not discharge its functions in respect of LCF in a manner which enabled it effectively to fulfil its statutory objectives,” the report said.