The FCA is carrying out another review in the wake of the pre-briefing debacle that wiped billions off the share value of some companies.
The City regulator has written to the Treasury Select Committee in response to its critical report following the incident involving a Daily Telegraph journalist.
One of the issues the TSC raised was around the effectiveness of the FCA’s board, particularly its approach to the management of risk.
In response, the FCA said: “The board agrees that as a matter of good corporate governance it is important that its effectiveness is regularly reviewed, and the board has agreed it will do so on an annual basis.
“Before the publication of the committee’s report, the board had agreed to commission another externally facilitated effectiveness report and we have since commissioned Dr Tracy Long of Boardroom Review to produce a review this year.
“We agree to publish the results. The board has further decided to commission an external review every other year, with an internal review taking place in alternate years.”
A previous review, commissioned by the FCA and carried out by Simon Davis, found that the FCA’s board was responsible for the inadequacy of the regulator’s controls on the identification, control and release of price-sensitive information.
However, the TSC report added: “It is also clear from Mr Davis’s report that the board of the FCA failed in its oversight of the FCA’s executive, and failed to identify the risks inherent in the FCA’s communications strategy.
“It is therefore surprising that the board’s review of its own effectiveness, conducted shortly after this incident, produced what its chairman described as a ‘satisfactory answer’.”
Responding to the FCA’s comments on the committee’s report, TSC chairman Andrew Tyrie explained that a review of the board’s effectiveness was needed.
Mr Tyrie said: “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 clarify lines of accountability is a step in the right direction – an overdue one.
“The regulators should hold themselves to standards at least as high as those they require of the regulated community.”
Background
In March 2014, the FCA briefed a journalist at the Daily Telegraph about its plans to review the life insurance industry. This wiped £3bn off of the value of insurance company shares and sparked anger from the Treasury and insurers.
A report by Clifford Chance lawyer Simon Davis, published last December, found that the regulators’ strategy for dealing with the media was high risk.
