RegulationDec 16 2014

‘One rule for the FCA, one for regulated firms’

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It appears that there is one rule for the regulator and one for the firms it regulates, the chairman of the influential Treasury Committee said today, as he pointed to a failure of any individual to take responsibility a bungled announcement which wiped billions off life insurer valuations.

At a Treasury Committee session today (16 December), Clive Adamson, outgoing head of supervision at the FCA, was grilled by various MPs about an apparently mis-handled press briefing in the wake of the FCA’s 2014/15 Business Plan.

The briefing led to price sensitive information being reported by The Telegraph and billions wiped off the share prices of implicated life insurance firms.

Committee chairman Andrew Tyrie asked whether any individuals at the regulator should be in the frame, rather than the collective responsibility suggested by Simon Davis, a partner at law firm Clifford Chance and the author of a damning independent report into the incident.

Mr Adamson responded by stating that collective criticisms were appropriate, although the report raised difficult things to think through in terms of accountability in the light of the senior management persons regime being brought in for the banking sector, which sets individual responsibility for firm’s failings.

“Going forward, clearly the chairman of risk should have clear individual responsibility for risk, just like the chair of audit should have responsibility for assuring controls, as with anyone subject to the senior management regime.”

Mr Tyrie pointed out the irony of a collective failure where no individual was responsible being the same as reports from banks made in wake of financial crisis, citing a risk of there being “one rule for the regulator and one for the firms”.

Mr Adamson said such a suggestion “would disturb me”, but that he did recognise the irony in the FCA’s position.

“Individual members should take responsibility, but assigning collective responsibility to the executive committee or the board doesn’t help that much in my view.

“The key point is that the chairs of the two committees - and I’m not trying to deflect blame - should be clearer about their accountability as we would expect of a regulated firm.”

Mike Kane, Labour MP for Wythenshawe and Sale East, asked whether the FCA’s statutory immunity from prosecution over things like money lost from mis-handling of price sensitive information had made it complacent.

Mr Adamson responded: “I think we treat our responsibilities very seriously and we’re not complacent,” adding that this while this was a theoretical moral hazard, in practice it depends on the way the executive and board treat specific risks.

He had previously told the committee that his decision to leave the organisation was driven “by not wanting to be part of the story”.

Mr Tyrie actually had a compliment for the exiting director, stating that rather than receiving phonecalls welcoming his departure, many in the industry thought he was a “tough regulator who also has a grasp from the business end”.

Mr Adamson was still able to give some detail on the ways that the FCA had sought to improve measures and controls since the leaks at the end of March.

He explained that following a review with the FCA’s practitioner panel that expressed concerns about the tone of the media strategy being too aggressive, “it is now in better shape”.

“We have been more rigorous about communications procedures, as it’s important that FCA is seen as part of the solution to industry's difficulties. not part of the problem. It’s important that the FCA doesn’t contribute to increased loss of confidence of investors by being too aggressive. We need to identify wrongdoing, but without damaging the rebuilding of trust.”

The communications team are now being trained to catch price sensitive information at various points in the process and different procedures have now also been put in place around thematic reviews, something Mr Adamson admitted was “a blindspot”.

Mr Adamson stated that the event exposed a lack of coordination on the day, but not a systemic issue.

“The board and executive committee were very exorcised by the event. I regret what happened and take responsibility,” he added.

peter.walker@ft.com