SLOPPY changes to insurance rules could undermine the government’s effort to boost savings, industry leaders warned yesterday, as the City watchdog revealed details of its probe into a bungled announcement of a market investigation.
The Financial Conduct Authority has hired Simon Davis, partner at law firm Clifford Chance, to find out what went wrong in the announcement.
Prudential boss Tidjane Thiam and Association of British Insurers’ head Otto Thoresen both said a stable industry and strong savings culture depend on co-operation between the sector, the regulator and the government.
But that was imperilled by the sloppy announcement of an investigation into life insurance products sold over the last 40 years.
The FCA revealed part of the information on the probe to a newspaper 12 days ago, but then failed to update the markets even though shares had been sent into freefall.
Davis’ review of the fiasco will look at the FCA’s slow response to the market turmoil, how it will announce new developments, and whether or not the regulator created a false market.
Thiam said Davis’ work is of vital importance to the FCA’s credibility.
“This is very much a situation in which even the perception of a lack of objectivity or thoroughness could be damaging to the FCA and its aims,” the Prudential boss said in a letter to George Osborne.
And Thoresen warned a continued breakdown in relations could endanger the government’s savings policies.
The policies are “all about how a population which is ageing and needs to save more for its future can be helped to do that effectively, how to create an environment where that can work well. The kind of experience we had during this period has not been helpful towards that,” he told MPs at the Treasury Select Committee.
Those MPs have asked to interview Davis before he starts work.
“The Treasury Committee will be seeing Mr Davis shortly. It is vital that this investigation is wholly independent of the regulator,” said its chairman Andrew Tyrie.
This is very much a situation in which even the perception of a lack of objectivity or thoroughness could be damaging to the FCA and its aims.
“This is all about how a population which is ageing and needs to save more for its future can be helped to do that effectively, how to create an environment where that can work well. The kind of experience we had during this period has not been helpful towards that.”
ABI director general Otto Thoresen to the Treasury Select Committee
PROFILE: SIMON DAVIS
CLIFFORD Chance’s Simon Davis will take on the task of leading the inquiry into how the FCA prematurely disclosed details of a review of the insurance industry, sending shares in insurance firms plunging last month.
Davis has been practising litigation and dispute law for over 27 years and has specialised in financial disputes internally and externally.
Davis has been with Clifford Chance since 1982, when he completed his Masters at Oxford University’s Magdalen College, and was made partner in 1994.
From 1995 to 2000 he was a recruitment partner for the firm, and has been head of commercial litigation since 2008. A former president of the London Solicitors Litigation Association, Davis is a member of the Council of the Law Society and is on the committee at the City of London Law Society.
In the Chambers UK guide for 2013, Davis is ranked number one in Litigation in the 100 Guide – a list of top business lawyers.
Clifford Chance is on the City watchdog’s “skilled persons panel” from which it picks law firms to investigate finance firms suspected of wrongdoing.
THE FCA INQUIRY
■ Simon Davis’ probe will look into whether the FCA’s botched announcement created a “false or disorderly market” in insurance shares.
■ He will also investigate why the FCA waited until mid-afternoon on a day of turmoil before acting to clarify the situation.
■ And he will probe who at the FCA knew what was happening, and how they reacted.
■ The review will also look at the co-ordination between different arms of the FCA announcing information to the market.