The Association of British Insurers has hit back strongly over claims it had more than a month’s warning of the now infamous botched announcement of a regulatory probe into four decades’ sales of life insurance policies.
The trade body told FTAdviser the Financial Conduct Authority did mention the review during “a routine meeting” in February, but that this was merely included as part of a “high-level overview” of its planned thematic work over the next year and on a “confidential basis”.
It added that the day before the now infamous revelations in The Telegraph on 27 March the FCA told the ABI that director Clive Adamson was giving a briefing to the paper, but that the regulator “declined” to give detail upon verbal request.
An ABI spokesperson added it had a scheduled meeting with the FCA to discuss the detail of the business plan on the morning of Friday 28 March, after Mr Adamson’s inaccurate description of the nature of the probe had been published.
The comments follow an article in FTAdviser sister publication the Financial Times this morning (4 April), which cited sources as confirming the ABI was “confidentially told in broad terms” about the review “well before” the Telegraph article was published.
According to the FT, the “advance discussion” with the ABI may “come under examination” as an internal probe has been launched by the FCA board. The trade body had previously claimed that companies in the sector had not been consulted prior to the article being published.
The spat is the latest in week-long series of recriminations following what was described by Treasury Committee chairman as an “extraordinary blunder” by the regulator last Friday (28 March), when it allowed what Legal and General termed a “disorderly market” to develop in life insurers’ shares.
The ABI waded straight to the centre of the fray by sending a letter calling to the Treasury over the weekend amid calls from four of its largest members for the resignation of FCA chief executive Martin Wheatley himself, according to The Sunday Times.
In a speech the next day, Mr Wheatley admitted the debacle - which coincided with the FCA’s first anniversary - was not the regulator’s “finest hour”, and signalled his support into an investigation which he said would affect him personally.
The investigation will also examine if the regulator has been too free with the press, which could signal an impending regression to the attitude held by the previous regulator which was often criticised as possessing a “fortress mentality”.
In spite of Mr Wheatley’s concilliatory tone, things only got worse from there and the FCA found itself under siege from all sides and by representatives of all of all affected stakeholders.
On Tuesday George Osborne wrote a strongly-worded letter to the regulator that was immediately made public demanding it “make good the damage” to its own integrity incurred by allowing insurers’ share prices to free-fall for six hours before issuing a clarifying statement.
Mr Osborne said: “These events go to the heart of the FCA’s responsibility for the integrity and good order of UK financial markets, and have been damaging both to the FCA as an institution and to [the] UK’s reputation for regulation stability and competence.”
Then on Thursday (3 April) the Financial Times reported that some of the big firms hardest hit by Friday’s market turmoil have taken legal advice to pursue the FCA over alleged market abuse.
And signs that the FCA’s relationship with the Treasury are appearing elsewhere, too.
Another interesting development came to light this week when FCA policy director Chris Woolard told the Treasury Select Committee that the regulator had not been consulted over Mr Osborne’s plans to overhaul the way people take income in retirement.
This would be odd enough in and of itself, but the quarrel became downright strange when the Treasury responded that the FCA had been made “aware in advance” of the chancellor’s Budget plans to liberalise pensions and supported the plans.
The whole messy ordeal is quite interesting, and the timing is almost darkly comic: last week the FCA no doubt had a suite of speeches and interviews in the pipeline to laud its first, then-unblemished year in power.
The celebrations will remain on hold for some time.
Bad advice
A tragic, textbook case of terrible advice came to light last week when IFA Martin Bamford told FTAdviser sister publication Financial Adviser two clients - an elderly couple - had been told to borrow three-quarters of a million pounds against their home and invest it in a single fund.
Mr Bamford said the case highlights the industry’s failure to monitor professional standards.
This week he added he had been put in an “impossible situation” and was unable to help the couple due to tougher Ucis rules. The couple had found themselves unable to access their money when the investment company froze all investor redemptions to preserve assets after the FCA warned Ucis may be “toxic”.
Knock it down, start over
Finally, providers this week called for the regulator to “tear up” the current annuities rulebook in light of Mr Osborne’s sweeping changes to the pensions sector.
Just Retirement, one of the firms whose share price took a hit on Budget day, said the current rules had been made irrelevant by the changes, and providers are now “constrained” in what they can offer retiring clients.
