The Treasury select committee has criticised the FCA for communicating with regulated firms through “Chinese whispers” and for ‘cack-handed’ press relations.
The chief executive of the City watchdog Martin Wheatley and its chairman John Griffith-Jones both appeared before the TSC on Tuesday to face questions on the Davis Review.
Published in November, the Davis Report looked into the issue of the press briefing of market-sensitive information.
An investigation was launched after a story about a planned investigation into pensions appeared in the Daily Telegraph on March 27, leading to £3bn being wiped off the market value of a number of insurance companies the next day.
Conservative MP Mark Garnier asked Mr Wheatley about the FCA’s communications strategy, and said: “I find this whole idea of using the media as a tool of regulation completely bizarre. We know for a fact that communication can be misunderstood.
“I have no doubt you are absolutely sincere in what you are saying, but the fact of the matter is it is not what you mean, it is what is being read.”
He said that when someone was using “such a crude tool” as the media to get communication out he ran a collosal risk of what was meant being misunderstood at many different levels.
“It is like Chinese whispers. By the time it has got down to some poor compliance officer sitting in the outer reaches of the Outer Hebrides who is trying to do an honest day’s work as an IFA, how on earth are they supposed to know what they are supposed to be doing?”, Garnier added.
Responding to these comments, Mr Wheatley said: “They are risks that have to be managed, and we work hard to try to manage those risks.”
Mr Wheatley added that the FCA’s overall strategy was appropriate and that pre-briefings were only done when the information was not market-sensitive.
However, Mr Garnier responded to Mr Wheatley’s comments by saying the risks the FCA was taking were “clearly unacceptable.
“A huge number of people lost a huge amount of money directly as a result of you creating a false market by your cack-handed approach to media relations.”
Mr Wheatley said: “Clearly we didn’t set out to create a false market, and clearly our 200 press releases a year don’t achieve that.
“It strikes me that the alternative you are suggesting is that we don’t communicate outside the very narrow channels of communication.”
Adviser view
Geoff Green, a financial planner at Merseyside-based Sorensen Financial Services, said: “They are probably not far off when they say not all firms read their emails.
“I probably read more in the financial press than I do from the regulator, and I think they should look at communicating with registered individuals directly – and that’s not difficult to do.”
