FCA staff struggled to identify and handle market sensitive information, according to an internal audit several months after the regulator’s pre-briefing scandal broke.
One of three internal audits from October 2014 - published today by the Treasury select committee - stated there was a significant risk of FCA staff who handle market sensitive information on a daily basis becoming “de-sensitised” to the sensitivity of the information they were dealing with.
Another audit also found it was unclear what constituted a crisis for the FCA and that once it was faced with one there was “a lack of directing policy” about how it should be handled.
Andrew Tyrie, chairman of the Treasury select committee, said: “The FCA has had a difficult couple of years – the Davis review illustrated some of the regulator’s institutional weaknesses.
“The reports – produced after the FCA’s extraordinary and incompetent briefing of the press in 2013 on its plans to investigate the insurance industry – shed some light on the extent to which the FCA is improving its standards, and the overall quality of its work.
“Deficiencies remain in the FCA’s handling of crisis management, external communications and market-sensitive issues. This has been evident from the FCA’s curious handling of their decision to drop an investigation into bank culture. There is clearly a great deal of work left to do.”
In December the FCA abandoned its review of culture at UK retail and wholesale banks claiming it would achieve the same results by “engaging individually” with banks.
The audit on market sensitive information found some FCA staff were unclear that sending information in the body of emails to firms and other external bodies, excluding the PRA and Bank of England, was not a secure form of communication.
Staff were also unclear whether and how they should indicate that the information they were sending was market sensitive and that it should be handled accordingly.
The audit also said there was a lack of practical guidance of how staff can identify, handle and manage market sensitive information across the FCA - with the exception of the enforcement division.
Auditors found it was not possible to establish a consistent view on who was accountable for the FCA’s approach to incident response and crisis management and what the roles and responsibilities of particular staff members were during an incident or crisis.
In March 2014 the Telegraph published an interview with long-term savings and pension Nick Poyntz-Wright, but with quotes attributed to the then FCA director of supervision Clive Adamson Mr Adamson without his knowledge.
The interview revealed the regulator would investigate the level of profits made by insurers from funds closed to new business which prompted a market sell-off that saw shares in insurance firms plummet by as much as 20 per cent.
In December 2014 the FCA published a report by Clifford Chance partner Simon Davis into its mishandling of the pre-briefing that led to the article, which found it to be “high risk, poorly supervised and inadequately controlled”.
In the audit reports the FCA said it was carrying out “significant work” to roll out new guidance on market sensitive information and pledged to enhance its frameworks on crisis management.
A spokesman for the FCA said today: “All actions raised in the audit reports have now been completed.”
