The heads of the Financial Conduct Authority’s practitioner panel and the Association of British Insurers warn the “immature” regulator wants to create “sensational headlines”.
The chairman of the Financial Conduct Authority’s practitioner panel and the director general of the Association of British Insurers have both criticised conflicts in the way the regulator discusses issues with the industry and how it communicates the same messages to the public.
The comments were made during the Treasury select committee’s third session of an inquiry into the press briefing of information in the Financial Conduct Authority’s 2014 to 2015 business plan.
At the start of December, the FCA published the report of Clifford Chance partner Simon Davis’ on handling of the press briefing.
The report was highly critical, stating that the regulator handled it in a manner that was “high risk, poorly supervised and inadequately controlled”.
The inquiry examined the events leading up to and following the publication of the FCA’s intention to review certain long-term life assurance products on 27 and 28 March on the Telegraph’s website and newspaper.
Following the article’s publication, billions of pounds were wiped from listed insurance companies, with the panic only subsiding when the FCA eventually published a clarification more than six hours after markets opened.
Otto Thoresen, outgoing director general of the ABI, told the committee he had read FCA press releases that did not reflect the substance of what was in certain reviews and reports.
He pointed out that in this specific case the problem was that the thematic review had not been published alongside any press release, so the industry body could not react with any statements of fact on the matter.
Mr Thoresen recalled some preliminary work on the annuity market review undertaken by the FCA last February, where the ABI had been consulted for their views on the issues, but upon publication the headline was that 8 out of 10 people could get a better deal from shopping around, something which conflicted with statistics in the report.
“There is a danger of tending into the territory of rhetoric, rather than the sticking with the facts,” stated Mr Thoresen.
Graham Beale, chairman of the practitioner panel, noted that last February his panel had flagged up that extensive pre-briefing and desire to generate “sensational headlines” could go horribly wrong and was an “accident waiting to happen”.
He added that the FCA specifically needed to be very careful about how information could be presented as it could have market consequences.
This approach from the regulator meant that a lack of balance in public messages was leading to overly negative reporting that “will undermine confidence and become part of the problem”, Mr Beale said.
He also expressed frustration that comments repeatedly made by the panel to the regulator “go into a blackhole”, without any feedback.
“We have had constructive dialogue with members of the executive team - Clive Adamson for instance - but we struggle to have the same impact with enforcement and market study activity,” Mr Beale stated.
“There have been occasions where we could have added value and context to thinking in market views... but the resource is not being fully utilised by all parts of the FCA.”
However, Mr Beale did point out that the FCA found itself in an “unfortunate set of circumstances” and the incident did not show complacency, rather that it reflected the immaturity of the organisation.
Mr Thoresen also said that ABI members were broadly happy with their continued constructive engagement and agreed with earlier testimony from former head of supervision Clive Adamson that it was the issue was with the processes that applied, rather than the people involved.
“Thematic reviews should have senior ownership across all aspects of development and delivery to see if it is on track,” he commented, adding that it was the duality between media teams and those driving the review that was the problem.
James Palmer, partner at Herbert Smith Freehills and chairman of the listing authority advisory panel, was also grilled by MPs, stating he was in favour of the FCA being able to communicate freely.
“My reaction is not to damn all pre-briefing... the problem here was the absence of process and review of the information being briefed on.”
He added that from his perspective the FCA’s actions would not have caused a market breach if it was a listed company, but would have been very close to the line.
“They would not have lived up to requirements, but while they allowed a significant miscommunication, they did not do it themselves, so it would have been a private rocket at a minimum... the natural remedy would have been a fine.”
He was however unable to put a figure on what size of financial penalty might have been levied and responded to questions over who regulates the regulator by pointing out that enforcement agencies that are susceptible to litigation get bogged down in it, adding that this would only be of benefit to lawyers such as himself.
peter.walker@ft.com
