London has a new sheriff in town. His name is Martin Wheatley and he runs the Financial Conduct Authority, successor to the much-maligned Financial Services Authority.
Mr Wheatley joins from Hong Kong, where he ran the Securities and Futures Commission (SFC), and before that the London Stock Exchange, where he was deputy chief executive. Back in London, he wants to be seen to be tough, the hard man taking over financial supervision.
He made a speech, in which he set out his new, bold approach: "The key difference between the future and now, and forgive me for being scary in my use of analogy, is we are being given the power to shoot first and ask questions later."
That was last September. For all his promise, Mr Wheatley made little immediate impact – the City is hardly quaking at the mention of his name. In fact, there are those who question his appointment, pointing out that he was made redundant from the LSE and his tenure at the SFC coincided with the global banking crisis – but most of the running in terms of policing the debacle in that Asian financial hub was made by the Hong Kong Monetary Authority.
To be fair, he is feeling his way – playing his way in, to use sporting parlance. He's reserved his firepower for his annual business review, in which he sets out future targets.
Presumably in the belief that it would gain maximum media coverage, someone authorised briefing part of his plan to a newspaper. If it was not Mr Wheatley himself, then he must have known about the selective leaking – indeed, say those with close knowledge of the inner workings of the regulator, he ought to have approved it.
So last Thursday at 10pm, The Daily Telegraph reported on its website: "Savers locked into 'rip-off' pensions and investments may be free to exit, regulators will say." Under this headline, there was more: the FCA "is planning an inquiry into 30 million policies sold by insurance companies from the Seventies to the turn of the Millennium".
Clive Adamson, the director of supervision at the FCA, was quoted saying: "We want to find out how closed-book products are being serviced by insurance companies, as we are concerned insurers are allocating an unfair amount of overheads to historic funds.
"As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal. As part of the review we will collect information to establish whether we need to intervene on exit charges."
The story was repeated in the paper's print edition the following morning. Cue mass panic as investors rushed to offload their holdings in the big insurers and the so-called closed-book or "zombie" funds. Shares in the specialist zombie firms Resolution and Phoenix plummeted 20 per cent; Legal & General, the biggest institutional investor in the UK was off 9 per cent; the Prudential, down more than 5 per cent.
It wasn't just UK long shareholders getting out; predicting the shares may fall further, hedge funds took large short positions.
Some six-and-a-half hours after the market opened – longer, after the evening web report – the FCA issued a calming statement. By then, though, the damage was done. Billions of pounds had been wiped off the value of the insurers' shares.
In the resulting fallout, the FCA has promised a full investigation to be carried out by an independent law firm. The wounded insurers are calling for Mr Wheatley's scalp. Andrew Tyrie, chairman of the Commons Treasury Select Committee called it "an extraordinary blunder".
George Osborne has sent an excoriating letter to John Griffith-Jones, the FCA chairman: "I am profoundly concerned by the events of last Thursday and Friday… These events go to the heart of the FCA's responsibility for the integrity and good order of UK financial markets, and have been damaging both to the FCA as an institution and to UK's reputation for UK stability and competence."
Then came this sentence: "The starting-point must be that the FCA holds itself to at least as high standards as it would expect of a listed company handling highly market-sensitive information, and should hold its own staff to the same standards it would expect of any approved person; questions such as the need for disciplinary action for individuals should be considered (and seen to be considered) in this spirit."
Wow. As government letters go, that is a well-aimed missile. To ensure there is no escape, Mr Osborne suggests some questions to which he wants answers. They include why was the briefing given and on what authority; why was the clarification issued so much later; and "where senior accountability should lie and what disciplinary action should be taken"? For good measure, Mr Osborne adds that he is copying the letter to Mr Tyrie.
Such is the directness of Mr Osborne's language and the manner in which the missive covers all the bases, that I wonder if a decision has been taken in the Treasury that Mr Wheatley should go – that a mistake was made in appointing him in the first place. Certainly, I cannot recall seeing a ministerial letter that is so pointed and leaving so little room for ambiguity and escape.
Where Mr Wheatley is on particularly sticky ground is that the FCA is also the UK Listing Authority. If a publicly listed firm were caught briefing market sensitive information it would be a criminal offence and a prosecution would ensue. Tracey McDermott, the FCA's director of enforcement, would be on to it like a shot.
As public servants, those responsible could try to claim statutory immunity, but that protection would not apply where there was misfeasance. In this instance, arguing themselves out of that one might prove difficult.
So far, Mr Wheatley is toughing it out: "If firms were involved in events like those we saw prior to the weekend, then we would ask serious questions. It is incumbent on us to answer the same." He added: "That is why I fully support the investigation into Friday's events…" He acknowledges that a clarifying statement from the regulator "should come sooner rather than later", but sources close to the FCA maintain it's too early to say whether disorderly trading had taken place.
Meanwhile, Mr Wheatley goes on the offensive in other directions, accusing bankers of succumbing to "ethical flexibility" in order to further their careers and announcing FCA investigations into whether banks improperly use client information to further their own interests or those of another client; and the controls placed upon traders supplying information for use in fixing benchmarks such as Libor.
This is kick-butt stuff from Mr Wheatley. He's attempting to take the fight to the City, to outgun his previous regulator chiefs. As he says, he will shoot first, then ask questions.
Unfortunately, if that were the case, based on what we know occurred last Thursday and Friday, he would by now be lying in the gutter riddled with bullets fired from his own watchdog.
I know what Mr Osborne's letter reminds me of: the loaded gun handed to someone "to take the honourable way out". They can do it our way or their way. Mr Wheatley was the one who chose to talk in terms of shooting first and asking questions later. If he wants to stick to that theme he should reach for that metaphorical revolver.Reuse content