OpinionApr 1 2014

FCA must not regress after ‘disorderly market’ debacle

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Oh what a difference a few days can make. For that matter, what a difference hours or minutes can make.

How long must Clive Adamson (pictured), director of supervision at the Financial Conduct Authority, have sat talking to The Telegraph’s Dan Hyde?

Between the minutes spent in this one-journalist briefing - and the more than six hours it took the watchdog to publish a formal statement to calm markets that had erupted in a fresh pique of panic in response to the subsequent article - the hitherto almost flawless first-year record of the new conduct regulator had been reduced to ruins.

Its planned birthday triumphalism today has been all but abandoned as vultures gather in expectation of someone from the FCA being forced to fall on its own virtuous sword.

For the record, in that six-hour silence on Friday the life insurance sector shed billions of pounds in value in what was described by Legal and General in an extraordinary public rebuke of its regulator as a “disorderly market”.

Under rules set by the UK Listing Authority, a division of the FCA, quoted companies must correct a misleading announcement ‘quickly’ where it leads to a price movement of more than five per cent. Friends Life owner Resolution, for example, saw losses reach 20 per cent at one point.

One of the great successes in what has generally been a laudable first year for the FCA has been improved access and openness

The key question, though, is what the consequences of all of this will be.

Chancellor George Osborne, apparently reacting to fierce lobbying across the life insurance sector calling for FCA chief Martin Wheatley’s head, has written a letter expressing his “profound” concern and detailing the lessons that must be learned.

Mr Osborne lists a series of questions, among which are whether anyone will face disciplinary action, who signed off the one-newspaper briefing and its content, and how the FCA should approach future dealings with the media.

For my money, Mr Adamson has been caught out engaging in macho posturing in front of a journalist, while the lamentably languid response of the FCA is also extremely concerning and Mr Wheatley must be held to account.

Whether or not any of these errors in judgement were so great as to require individual disciplinary action I could not say. What I can say is we must not allow this sorry episode to derail impressive strides made by the FCA in terms of transparency.

One of the great successes in what has generally been a laudable first year has been improved access and openness. Part of this involves being prepared to allow directors to speak to consumers through the media in less formal settings and without formal ‘on-message’ pomp and ceremony.

No journalist wants to go back to the bad old days of the FSA’s stonewalling press office and remote top brass. Regulated companies and the public should want this even less.

Let’s not allow Mr Adamson’s folly to lead to such a regression.