Top officials at the City regulator, including its boss Martin Wheatley, are to be denied bonuses after the botched handling of the announcement of a review into the life insurance sector.
Billions of pounds were wiped off the value of life insurance company shares in March when the Daily Telegraph reported the Financial Conduct Authority (FCA) would be conducting a sweeping review of exit fees paid on insurance policies.
Wheatley, the board of the FCA and its executive committee, are criticised for their handling of the affair in a report by Clifford Chance lawyer Simon Davis, who concluded that the advanced briefing to the Telegraph should not have taken place and that the way the fallout was handled was not acceptable.
In response, FCA chairman John Griffith-Jones said the regulator accepted the criticism and apologised for its mistakes. “The board fully accepts Mr Davis’ criticisms and on behalf of the FCA we apologise for the mistakes that were made and the shortcomings in systems and controls which his report has revealed.”
The investigation cost £3.8m, of which £2m was paid to Clifford Chance.
The FCA strategy of briefing the Telegraph was well intentioned, said Davis, but went wrong. “The manner in which it was pursued was, however, high risk, poorly supervised, and inadequately controlled.
“When it went wrong, the FCA’s reaction was seriously inadequate and fell short of the standards of those it regulates,” the report said.
Commenting on the news, Chancellor George Osborne said: “A strong organisation learns from its mistakes and improves as a result. I’m confident that the FCA will do the same.”
Earlier this week the FCA announced the departures of Zitah McMillan, head of communications, and Clive Adamson, director of supervision.
They are among four staff being denied bonuses, the other two being Wheatley – who could have received £115,000 – and David Lawton, director of markets. The bonuses of all members of the executive committee are to be cut by 25%.
Davis said the board bears collective responsibility and he found that Adamson, who was quoted in the Telegraph, did not speak directly to the paper nor did he know his quotes would appear. He also sent an email to a media manager at the FCA saying “thanks looks good” at 7.41am on the morning the story appeared, even though he had not read the article.
Share prices started falling at 8am when the market opened but it was not until after 10am that McMillan was called at home and asked if there were any problems by a senior official at the FCA. She was not told of concerns about the accuracy of the article until after that call took place.
It took until after 2pm for a statement to be issued clarifying the scope of the review into the life insurance business.
Davis said Wheatley was disadvantaged by Adamson, Lawson and McMillan but should take credit for insisting that a clarifying announcement be made. Even so, Wheatley “should have instead insisted that all relevant individuals met in person or by telephone urgently to finalise the clarifying statement”.
The article appeared before the FCA had briefed the Association of British Insurers and had focused on exit fees – the precise opposite to what the regulator had hoped. McMillan said she did not know about the advanced briefing to the Telegraph although colleagues said she did.
The interview was actually given by Nick Poyntz-Wright, director of long-term savings, and the reporter was told he could attribute the quotes to Adamson. His quote should not have been attributed in this way: “Control over messaging had been lost. The article was therefore to come as a surprise to the FCA all the more so because it appeared online ... the day before the advance briefing to the ABI.”
Davis said the delays in issuing a clarifying statement were unacceptable.
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