The author of a report into the Financial Conduct Authority’s Business Plan briefing yesterday (10 December) told the Treasury Committee that he did not think any executive or board member should have to take individual responsibility for the debacle.
Giving evidence on the same day his report was published, Simon Davis, a partner at law firm Clifford Chance, told MPs that various staff members detailed in the document bear collective responsibility for divulging price-sensitive information to the Telegraph journalist.
As extensively reported by FTAdviser, the review found the FCA’s handling of the pre-briefing and interview to be “high risk, poorly supervised and inadequately controlled.”
The regulator received nine complaints yesterday and was criticised by the industry for failings that would see regulated firms face severe punishment.
Mr Davis was asked by Conservative MP Steve Baker whether any one FCA board members should take individual responsibility, to which he responded: “In this situation, I found that there were a series of failings that could not be tied to one single person. It takes the risk that no particular individual will be held responsible, so the board will carry the can.”
He pointed out that his report had laid blame on various people involved and made recommendations for how the regulator could avoid such problems in the future, but left any further punishment to the Treasury committee.
“I’m not ducking the issue to say that it is a matter for the Treasury and your committee to take a view - my view is that they should be collectively responsible.”
Mr Davis noted that the FCA will not be giving bonuses to chief executive Martin Wheatley, director of supervision Clive Adamson, director of communications Zitah McMillan and director of markets David Lawton.
He added that the regulator’s reorganisation, detailed earlier this week and apparently not in direct response to the report, would appear to fix some of the issues that led to the leak.
When initially quizzed by the committee’s chairman Andrew Tyrie, Mr Davis stated that there were errors of judgement and serious failings, but did not go as far as calling the FCA negligent.
He also stopped short of branding them systemic failings, stating that this had a “pejorative whiff about it” and preferring to say that there was a lack of controls and the system broke down.
Mr Davis said that the FCA’s policy of using the media as a tool of regulation was inherently risky, but it was not led by the media and there was not undue influence.
“Ultimately, if you use that tool, then you’d better be sure it is appropriately controlled,” he added.
He did not advocate a muzzling of the press, and while the report did consider the possibility of the FCA demanding prior approval on articles, he pointed out that it was a “difficult balancing act to get across messages while taking into account unintended consequences”.
Conservative MP David Roughley contended that any “serious, sentient” PR person should have known that journalists record interviews and therefore the FCA should have done the same in order to avoid situations such as these.
He called for an end to such pre-briefings, to which Mr Davis responded that the FCA may want to continue briefing firms and industry bodies, but he was not convinced that the media need to be briefed.
Labour MP Andy Love asked about the Telegraph’s refusal to give anything more than limited extracts of the journalist’s notes and how a briefing and interview aiming to dispel concerns about exit fees had the opposite conclusion.
Mr Davis responded: “This is the most challenging area of the whole investigation, because you can see clearly that there was some discussion about exit fees, but the FCA weren’t looking to remove them, and nonetheless that was what came out in the article.
“There was speculation that went beyond the pure facts, but enough had been said in the briefings to give the Telegraph the leg up to speculate,” he stated, adding that he thought the Telegraph’s speculation was reasonable given the potential outcomes of the thematic review, although the online headline was misleading and there were shortcomings at the FCA for allowing the article to be created.
peter.walker@ft.com
