The Financial Conduct Authority has responded to the Treasury select committee’s request for further information over the botched press briefing of its Business Plan for 2014 to 2015.
At the end of March last year, the FCA pre-briefed a Daily Telegraph journalist about its plans for a thematic review of the life insurance market.
The subsequent article, quoting director of supervision Clive Adamson, stated that the regulator was planning to investigate the level of profits made by insurers from funds closed to new business, possibly forcing them to allow savers access to some 30m policies over exit fee concerns.
A market sell-off on the morning of publication saw shares in such firms plummet by as much as 20 per cent, before the FCA published a clarification later in the day.
An independent inquiry was commissioned, carried out by Clifford Chance partner Simon Davies, which was damning of the FCA’s conduct, but did not single out any one staff member for specific blame.
Since then, the Treasury select committee has grilled the various senior staff involved - with some subsequently leaving - and called for evidence that the Davies report’s recommendations were being heeded.
Yesterday (12 October) the committee’s chairman Andrew Tyrie published the FCA’s response, which generally took on board the changes that were called for, often pointing to an internal restructure undertaken in December.
At that time, the FCA identified eight overarching principles that guide its communications approach: promoting understanding, accuracy, transparency, accessibility, predictability, consistency, responsiveness and professional excellence.
It pointed out that the information classification system has been revised in order to increase the focus on price-sensitive information, with that judged to be price sensitive placed in the ‘FCA Controlled Distribution’ category or new category, ‘FCA Highly Sensitive Information’.
Shortly following the events last March, the board commissioned an internal audit into incident response and crisis management capability.
“Following this the FCA has taken considerable steps to improve in this area,” read the response.
“While we have aimed to ensure that key staff are familiar with the new framework and able to respond appropriately, we continue to depend on the individual and collective judgment of our people.”
The FCA’s existing crisis management and incident response framework, which had focused on operational disruption, has been enhanced to emphasise the importance of rapid and appropriate responses under a wider range of circumstances; including incidents in which activities might have an impact on the market.
The response added that “significant improvements” have been made to determining when emerging issues require escalation for senior decision-making.
In terms of the FCA’s board, it agreed that to ensure effectiveness it is regularly reviewed, with an agreement to do so on an annual basis.
An externally facilitated effectiveness report was also commissioned - with Tracy Long of Boardroom Review - with the review’s results to be published later this year.
“We expect that our senior management should meet the same standards of professional conduct required elsewhere, and be held accountable for functions they personally direct,” stated the FCA’s response, adding that the core principles of responsibilities maps will be applied to its own senior managers.
Mr Tyrie reiterated is earlier point that by breaching its own listing rules last year, the FCA created a false market in life insurance shares, putting its own statutory objectives at risk.
“The Treasury Committee’s report in March 2015 identified a number of concerns in the light of the FCA’s mishandling of this episode. The committee recommended – among other things – that the FCA should carry out investigations into its standards and culture, its communication methods and the Board’s effectiveness.
“It is welcome that the FCA now appears to have accepted the need for this. In particular, the FCA’s work to identify the individual responsibilities of its own senior managers and to clarify lines of accountability is a step in the right direction – an overdue one.”
He added that the committee will examine these issues further with the FCA at an early opportunity.
peter.walker@ft.com
