Clifford Chance partner Simon Davis, appointed by the regulator in April to review its decision to brief the Telegraph on a review of the life insurance market set to be announced in its 2014-2015 Business Plan, described the FCA’s actions as well-intentioned but ultimately “high risk, poorly supervised and inadequately controlled”.
By seeking early coverage of its plans, which were due to be announced several days later, the FCA hoped the scope and objectives of its review would be better understood.
But when it went wrong, as it did in the case of the Telegraph briefing, the regulator’s reaction was “seriously inadequate and fell short of the standards it expects of those it regulates,” the Davis report found.
In March, FCA director of long-term savings and investments Nick Poyntz-Wright briefed a Telegraph journalist over the phone on details of a supervisory probe into the treatment of “long-standing” customers in insurance contracts.
The news prompted significant falls in the share prices of a number of life companies, including Aviva, Prudential and Legal & General.
The Davis report reveals staff working in the FCA’s supervision division warned the regulator not to brief the newspaper. To do so, they said, would pile more “misery” on life insurers already reeling from the Budget announcements.
But the view held by the FCA was that its probe could be misunderstood when it was announced, and that early coverage might help avoid this.
It also leaked details of other projects contained in its Business Plan to other national newspapers, including The Independent, The Times and Sky News.
The Davis report also revealed that it was never discussed internally at the FCA whether its Business Plan contained ‘price-sensitive’ information.
Treasury committee chairman Andrew Tyrie, who at the time described the leaked details of the FCA’s work as an “extraordinary blunder”, said in May he welcomed the terms of reference of the independent review.
The committee is set to interrogate Davis about the review on 10 December.
FCA chief executive, Martin Wheatley, director of supervision Clive Adamson, director of communications and international Zitah McMillan and director of markets David Lawton will not be receiving a bonus for 2013/14 as a result of the failing.
The 2013-2014 bonus payments for all other members of executive committee have been cut by 25%, the FCA said, adding other disciplinary action has been completed as appropriate.
Costs lawyers told Professional Adviser the Clifford Chance inquiry could cost in the region of £10m but in today’s report the total expense is listed at £3.8m.
It has also been revealed that the law firm is on an FCA panel tasked with conducting its section 166 investigative work.
However, the regulator has refuted any suggestion of a possible conflict of interest, pointing out Clifford Chance has yet to carry out a S166 review.