City regulator sweats ahead of Davis probe

Caitlin Morrison
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FCA boss Martin Wheatley
The FCA will be opened up to scrutiny this week as a review of its insurance work is published

Roman poet Juvenal, one of the world’s first great satirists, left an important legacy in the form of the phrase “quis custodiet ipsos custodes?”. It translates as “who will guard the guards themselves?”

The quotation is especially apt this week as we await the findings of a lawyer appointed to pass verdict on one of the regulator’s most serious lapses of judgement ever,

Clifford Chance litigation partner Simon Davis, who was appointed by the organisation in April to carry out a review, is in this case the external guard. His probe became necessary after a report in the Telegraph stated that the regulator was planning an inquiry into 30m pension and investment policies. The FCA later clarified that its review would have a much narrower focus, but not before the article caused chaos in the insurance market. The share value of several life insurers, including Aviva, L&G and Prudential, tumbled.

The Telegraph attributed the information to FCA director of supervision Clive Adamson, who is due to leave the watchdog ahead of the Davis report’s publication, although market insiders have raised questions over who the actual source was. Zitah McMillan, director of communications at the public body, is also likely to step down.

The FCA yesterday declined to reveal the exact date of publication for the Davis report, and would not comment on any possible outcomes of the review.

When the media leak occurred, many called for Martin Wheatley, the regulator’s chief executive, to fall on his sword, a suggestion he laughed off. And he has not been cowed during the process of the review, for which the FCA has set aside £1.7m.

Wheatley said at the FCA’s annual meeting in July: “We have a massive agenda and a huge amount of work. The one thing we can’t do is go into purdah while we wait for it [the Davis report]. It is business as usual.”

However, as someone who espouses a somewhat draconian attitude towards good practice – he famously stated that he would take a “shoot first, ask questions later” approach as regulator – it may become difficult to retain control over the financial services sector if that attitude is applied to everyone but himself.