MPs have accused the UK’s Financial Conduct Authority of failing to protect businesses and investors swept up in the collapse of specialist lender Greensill Capital, saying the crisis “draws yet more uncertainty” over the efficacy of the City regulator, and that it is time for a review of its powers. Greensill filed for insolvency on Monday, prompting concerns that the failure puts jobs at risk at one of its biggest borrowers, the metals manufacturer GFG Alliance Group. Founded by the entrepreneur Sanjeev Gupta, GFG Alliance employs 35,000 people around the world, including around 5,000 UK workers. Greensill allows businesses such as GFG to borrow money to pay their suppliers. Gupta met trade unions representing steelworkers on Tuesday, assuring them in his first public comments on the turmoil that his business had “adequate funding”. However, his companies were reported to have missed employment tax payments to HMRC, and repayments to Greensill have been suspended. “The FCA exists to protect consumers and businesses from abuses of financial institutions, but after less than 10 years, already has a string of scandals under its belt,” said Kevin Hollinrake, the Conservative MP and co-chair of the all party parliamentary group on fair business banking. “The fact that Greensill Capital was allowed to operate in the UK in the shadows demonstrates a failure to fulfil its requirements.” The scandal follows the furore around the collapse of a fund run by the former star investment adviser Neil Woodford, and the £236m implosion of London Capital & Finance, which prompted the FCA to be reprimanded by a court of appeal judge for failing to take action in time to protect savers. Parliamentarians, including the former Treasury minister Paul Myners, have been raising concerns about Greensill for months. Lord Myners said ministers and regulators had been too slow to act. “I have been asking parliamentary questions about Greensill Capital since June 2019 in an attempt to draw attention to potential systemic risk and fraud,” he said on Tuesday. “I received nothing but bland responses from government and financial regulators who appeared to have no appetite to ask some pretty obvious questions.” Greensill is headquartered in Australia but its largest offices are in the UK, where it employs 600 people. However, it has avoided oversight by the FCA due to the fact that lending to businesses, rather than consumers, is not regulated in the UK. The watchdog does regulate the information and marketing of investment products, such as the packaged loans that Greensill sold to investors for cash. For that, it relied on an arrangement known as appointed representation. This allowed Greensill Capital Securities to piggyback on the regulatory licence of a completely unrelated firm, the American-owned ACA Mirabella, which has an entire business model based on supplying appointed representatives to third parties. The arrangement means ACA Mirabella, rather than the FCA, is ultimately responsible for overseeing Greensill Capital’s narrow scope of regulated activities, including business reports, its annual audit, and supervisory check-ins. It has emerged that ACA Mirabella terminated its relationship with Greensill on Friday. ACA Mirabella said in a statement that it “maintained appropriate compliance oversight over that function, per our regulatory responsibilities”. Hollinrake criticised the arrangement, saying it allowed Greensill to operate “in the shadows”. His cross-party group is now calling for an “urgent review of the FCA’s powers and its willingness to use them”, he said. “The ‘appointed representative’ structure is not appropriate for a firm with the majority of its operations in the UK, and the FCA should at the very least end this practice. However, the fact that this is allowed draws yet more uncertainty of the efficacy of the FCA.” The appointed representative structure has existed in the UK since 1986 and is meant to give firms the right to operate locally while they apply for their own licence. But some rely on firms such as ACA Mirabella for expertise on local regulations. Any changes to that model would require government legislation. The FCA and Greensill declined to comment. The Treasury was not immediately available for comment. Greensill was thrown into crisis last week after its own financial backers including the insurer Tokio Marine, the banking group Credit Suisse, and the Swiss finance house GAM Holding withdrew support amid concerns about the firm’s management and the growing pile of loans issued to Gupta’s GFG. Greensill had been holding out for a rescue deal with the private equity giant Apollo Global, but talks have stalled, according to Bloomberg. The firm was expected to arrange a pre-pack deal that would allow Apollo to cherrypick the best assets and leave the debt linked to GFG behind. While the FCA has not taken any action, the crisis triggered alerts at other regulatory bodies, including the Bank of England, the European Central Bank and Germany’s financial watchdog, BaFin. Gupta assured unions he was committed to seeing Liberty Steel UK succeed and was looking for replacement funding. “While Greensill’s difficulties have created a challenging situation, we have adequate funding for our current needs”, the company said in a statement. GFG, however, has reportedly missed payments to the UK tax authority, despite accepting hundreds of thousands of pounds per month to keep workers on the Covid furlough scheme, according to the Financial Times. GFG was not immediately available for comment.