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FCA Bosses Face MPs' Ire Over Insurance Probe

FCA Bosses Face MPs' Ire Over Insurance Probe

The heads of the City watchdog will be severely criticised next week by a panel of MPs over its handling of a briefing which wiped billions of pounds from the value of British insurance companies.

Sky News has learnt that the Financial Conduct Authority (FCA) will be accused of a "dereliction of duty" in a report to be published by the Treasury Select Committee.

John Griffith-Jones, the FCA chairman, and Martin Wheatley, its chief executive, are expected to be singled out for criticism by the MPs, a source said on Friday.

The regulator's handling of news of a planned inquiry into the sale of millions of closed-life insurance policies last March sparked chaos in the London stock market, with shares in companies such as Aviva, Friends Life and Legal & General falling sharply.

The story in The Daily Telegraph, which sparked fears of a draconian regulatory clampdown, was subsequently clarified by the FCA but not until more than six hours of trading had elapsed.

George Osborne, the Chancellor, and Andrew Tyrie, the TSC chairman, expressed disquiet over the incident, while the FCA's non-executive directors immediately ordered an inquiry to be led by Simon Davis, a partner at the law firm Clifford Chance.

Mr Davis' report, published in December, criticised the FCA's approach to information disclosure and made a string of recommendations that the watchdog subsequently agreed to implement.

It said that the regulator's briefing had been "high risk, poorly supervised and inadequately controlled. When it went wrong, the FCA’s reaction was seriously inadequate and fell short of the standards expected of those it regulates."

The source said the TSC report would echo many of Mr Davis's criticisms and recommendations, including a prohibition on the disclosure of potentially market-sensitive information until its general dissemination.

Next week's report will not directly call for the resignation of either Mr Griffith-Jones or Mr Wheatley, they added.

However, they said there had been some disagreement between TSC members, with some calling for a tougher rebuke of the FCA's leadership.

Since Mr Davis's report, a number of senior FCA executives have left the organisation, including Clive Adamson, the former head of supervision, and Zitah McMillan, the former communications and international director who has since resurfaced in a senior role at a major payday lender.

The FCA said in December that their departures were the result of a restructuring rather than Mr Davis's report.

Mr Adamson, Mr Wheatley and Ms McMillan were all criticised in Mr Davis's report, alongside David Lawton, the FCA director of markets.

All four forfeited their bonuses for last year as a result, while any discretionary payouts for the current year are also under threat because of the £3.8m cost of the inquiry.

Mr Tyrie said in December that the report's findings illustrated a regulator "pursuing the wrong strategy in the wrong way".

“The Committee will, among many other things, examine whether these errors were a one-off or whether they reveal something amiss, perhaps seriously amiss, with the standards and culture of the FCA. We will also examine remedies, both those proposed or already announced, and others.”

A TSC spokesman and the FCA both declined to comment.