The City watchdog has not learned its lessons from the bungled insurance announcement which rocked insurance firms’ shares last year, an influential group of MPs said in a hard-hitting report today.
Sloppy communications between the Financial Conduct Authority (FCA) and a newspaper led to a report that the watchdog was planning a probe into millions of insurance and pension policies, immediately wiping billions off the market value of firms across the sector.
“By breaching its own listing rules, the FCA created a false market in life insurance shares – investors were trading on the basis of misleading information,” said the treasury select committee (TSC) report. “Had a regulated firm behaved as the FCA did last March, the FCA is likely to have imposed a considerable fine. There seemed to be one rule for the regulator, and another for the regulated.”
And the MPs said the regulator was slow off the mark in establishing an independent investigation into its mistakes, and has not taken sufficient steps to make sure it does not happen again. “The evidence from this episode suggests that problems may still exist at the FCA. It is not yet clear to the committee that the FCA has fully grasped this,” they said.
However, the TSC stopped short of recommending any of the watchdog’s bosses resign over the messy announcement, a step some insurers had previously hoped for.
Two heads did roll – supervision boss Clive Adamson and comms chief Zitah McMillan. But the FCA denied those redundancies were related to the case, a situation the MPs argue could be deliberately misleading.
“Clive Adamson and Zitah McMillan were the two senior executives most heavily criticised by Simon Davis in his report. Yet their departures from the organisation, announced by the FCA two days before the publication of the Davis Report, were presented as being unrelated to the incident,” said the TSC’s report.
“This might reasonably lead to suspicions that Mr Adamson and Ms McMillan were being made to take the blame in a contrived media-handling operation for the mishandled pre-briefing, while allowing the FCA to claim that this was not the case.”
Adamson, in particular, was well-liked by the sector, which saw him as knowledgable and with an unusual degree of private sector experience – a quality that is sometimes said to be lacking at regulators.
The FCA last night admitted it had made mistakes and promised it would try to learn from them.
“As a regulator we expect the highest standards of ourselves. Clearly, as the Davis Review identified, we fell well short of those standards,” the watchdog said in a statement.
“The FCA is determined to learn the lessons and ensure that this will never happen again.”