Financial Conduct Authority chief executive Martin Wheatley has admitted the regulator’s handling of probe into so-called zombie insurance funds that caused a ‘disorderly market’ on Friday (28 March) was not “our finest hour”.
In a speech on leadership and conduct in London, Mr Wheatley said like any firm that acted in a similar fashion the regulator should face “serious questions” as he signalled his support for an investigation into the fiasco.
According to FTAdviser sister publication the Financial Times, Mr Wheatley later said that as chief executive he expected to be personally affected by the inquiry.
The speech came a day after the chief executive who has garnered much support during his first year in charge of the conduct watchdog faced calls to step down, with four large life insurers saying his position was “untenable”.
On Friday (28 March), the Telegraph published an interview with Clive Adamson, FCA director of supervision, who told the paper the regulator is investigating the level of profits made by insurers from funds closed to new business.
The Telegraph said this could force pension providers to allow savers that have taken out some 30m policies over the past four decades to exit or switch to a better deal for free over exit fee concerns.
A market sell-off saw shares in insurance firms plummet by as much as 20 per cent for the second time in as many weeks, but they later recovered after the FCA issued a clarification stating it would not be seeking to retrospectively ban exit fees.
Market observers criticised the fact that it took more than six hours for the FCA to issue the clarification. The FCA’s own UK Listing Authority demands companies correct incorrect announcements ‘quickly’ where they prompt a movement of more than 5 per cent.
Others said the fact that shares recovered after the FCA published its statement proved markets were acting on inaccurate information.
Mr Wheatley said: “Whenever markets move as they did on Friday – scrutiny rightly follows – and this is no different for the FCA. If firms were involved in events like those we saw before the weekend, then we would ask serious questions.
“It is now incumbent on us to answer the same. That is why I fully support the investigation into Friday’s events announced by our board. We will share the findings publicly in due course.
“This was clearly not the FCA’s finest hour – but it does serve as a timely reminder of the importance to all parties involved in markets of the care and thought that is needed when handling the significant amounts of information we hold as a part of going about our day-to-day business.”
The investigation announced by the FCA board on Friday will involve an unnamed law firm.
The Sunday Times reported that the Association of British Insurers is set to write to chancellor George Osborne to complain about the conduct of the FCA, while sources at “four of Britain’s biggest insurers” are said to have branded chief executive Martin Wheatley’s position “untenable”.
Mr Wheatley’s speech to delegates yesterday focused on the FCA’s first year in power and the conduct it was seeking to drive across the market.
He said that the “vast majority” of FCA activity has linked back to five core themes: the principle of acting as a good agent; clean pricing; managing conflict of interest in the use of information; financial crime and quality of market infrastructure.
Mr Wheatley said: “Some of this work has already concluded. Some is ongoing. Some is moving towards conclusion in the first half of this year, including a couple of the major thematic reviews we launched in the second half of 2013.”
