Earlier today the Financial Conduct Authority published law firm Clifford Chance’s report into the regulator’s handling of a life insurance review press briefing. Here we pick through the finer details of the 200+ page document to give you the most interesting information.
Clive Adamson didn’t give the interview
One of the key findings of the review is how the FCA’s media strategy spectacularly backfired. It appears the The Telegraph was given an exclusive advanced briefing, as the regulator sought to avoid the nature and scope of the life insurance review being misunderstood when it was announced for the first time in the Business Plan on 31 March.
The review was a “discovery” piece of work to obtain information about the nature and extent of exit charges and whether they might inhibit customers from switching. Although it made no reference to a review of exit fees, there was a rather prescient concern that it would be misinterpreted as such.
Following the Budget, those working on the life insurance review in the supervision division got nervous about the Telegraph briefing.
Views expressed via email included “my view is that we shouldn’t do a press story on this” and it “just piles misery on life companies”, with express reference made to the impact of the Budget on share prices.
Despite these concerns, director of communications Zitah McMillan (who is leaving the regulator along with Clive Adamson; coincidence?) led discussions that stories would be “safe” and not controversial, according to Martin Wheatley.
However, Ms McMillan stated that she did not authorise the pre-briefing and a manager in the media relations team confirmed this.
Contrary to opinion, director of supervision Clive Adamson did not give the interview to the Telegraph. The telephone interview was in fact conducted by long-term savings and pension Nick Poyntz-Wright, but with quotes attributed to Mr Adamson without his knowledge.
Mr Adamson was aware of the briefing, but expected to be consulted further and had understood that he would be able to approve quotes.
Clifford Chance’s report criticised the handling of the decision to let the briefing go ahead, despite the knowledge that it could contain price-sensitive information.
FCA was slow to respond
The report stated that the practice of pre-briefings is not new, but there were no policies or guidelines in place and no process for ensuring that pre-briefings did not contain price sensitive information.
It also criticised the fact that there is no training provided within divisions on the identification, control or handling of price-sensitive information of any possible market abuse complications.
The media associate who was present during the interview did not share any concerns with the media manager and after reading the article had messaged his superior to say it was “a bit sensational, but it seems about right”.
The media associate focused on the positives of a high profile story for the FCA, without appreciating the consequences for the life industry when the markets opened the next day.
No complaint was made to The Telegraph and the lack of concern led to the slow response when the piece was published the paper the following day.
Mr Adamson was emailed the online article the previous evening, but had not read it, and was “taken by surprise” when he received furious calls from life insurance companies.
The wording of a FCA statement was finally approved at 2pm and it was finally issued on the Stock Exchange at 2.27pm, “following which the share prices in the affected insurance companies recovered substantially, but not entirely”.
Senior executives to blame
The report dished out blame to the various parties involved, starting with Mr Adamson, who should have taken steps to ascertain precisely what had been told to the Telegraph, compared to what had been reported, and should have escalated the fact a price-sensitive issue had arisen to Mr Wheatley.
David Lawton, the FCA’s director of markets, was criticised for not demanding a clarifying statement early enough as he was not aware that the content of the article was considered by the supervision division to be inaccurate.
It should not have been possible for a detailed pre-briefings strategy to be developed without the involvement of Ms McMillan, according to the report, and she should also have taken responsibility for the proper supervision of the media associate and controls around interviews.
Mr Poyntz-Wright was criticised for not speaking to Mr Adamson to explain the strong reservations held by him and his team about the pre-briefing taking place. He should have also briefed Mr Adamson post interview on the journalist’s focus on exit fees and prepared them for the possibility that the article would appear in “damaging terms”.
Finally, Mr Wheatley was deemed to be disadvantaged by the failures of senior staff members to escalate serious issues to him, however delays in the clarifying statement could have been avoided by him insisting that all relevant individuals meet in person or by telephone.
FCA needs ‘substantial improvement’
The report concluded by recommending “substantial improvement” in the procedures relating to the identification, control and release of price-sensitive information, and the market abuse implications of a wrong decision.
It suggested centralised policies and training, along with detailed procedures tailored to each business team.
“We recommend also that internal audit review the approach of the supervision and communications divisions to the identification and handling of price-sensitive information, as was done earlier in the year in relations to the UKLA.”
Similarly, business reviews should not be shared more than is necessary for legitimate purposes, and in those cases, the FCA must ensure that there are suitable controls and dealing restrictions in place.
Any announcements of thematic reviews should avoid direct or indirect messaging which suggests the FCA has a pre-determined conclusion about the nature an extent of any misconduct, or the actions it may take following the review.
Finally, the report stated that it was not convinced that pre-briefings of forthcoming announcements are necessary.
peter.walker@ft.com
