The Financial Conduct Authority made a profound blunder a year ago when it briefed a national newspaper journalist about market-sensitive reforms to the insurance sector.
It compounded that blunder when it delayed making a clarification.
Yet now it feels as if MPs are intent on maintaining the pressure on the FCA’s chief executive, Martin Wheatley, its board and its staff, unsatisfied that they have not prostrated themselves sufficiently before parliament and the gods of the market.
The Treasury select committee says it has identified a systemic weakness in standards and culture at the FCA and criticised Mr Wheatley for not acknowledging that the regulator’s communications strategy was partly to blame.
A few weeks after the debacle, I wrote that the more cynical lobbyists in the insurance sector may have seen an opportunity to put the FCA – an organisation breathing down their necks on a huge range of issues – on the back foot. With hindsight, it was the chancellor they should have been worrying about.
Of course, the life offices had reason to complain. No board wants to be put through market turmoil because of a newspaper report that may not have been quite on the money, whether it was the briefer or the briefed who got things wrong. The subsequent internal report showed the press operation left a huge amount to be desired in terms of process and even attitudes.
But what MPs do not appear to appreciate is how vital the FCA’s role is now. With the new pension freedom, we have a revolutionary shake-up and the releasing of a huge amount of investors’ money.
Another market change is due next year, if the plans for annuity resales get off the ground. Some would argue the reforms represent a huge boost for scammers but also for firms with investment offerings that sit in a sort of grey market between scams and legitimate fund management.
The FCA also has to police providers, investment advisers faced with unprecedented demand, and execution-only businesses of varying levels of experience.
Simultaneously, the regulator is uncovering other worrying but useful intelligence about the marketplace. It recently warned fund managers that they were not disclosing leverage positions adequately and that some property funds had a patchy record on managing liquidity. This is the FCA sounding a yellow alert and for that it surely deserves credit.
It comes as supervision is being revamped in a bid to stop future Arch Crus and Keydatas. At last, the FCA is aiming to shut the stable doors before the horse has bolted – which is what the FCA should be doing.
That is why regulated firms may wish to consider how long they take to deal with a persistent complaint or a regulatory blunder. They may then wish to consider that these constant attacks from MPs are the closest a regulator may come to such an experience. The MPs actually make that comparison. Advisers may welcome the FCA receiving a little of its own medicine. Yet I wouldn’t let that feeling last too long.