The new head of the Financial Conduct Authority's determination to shoot first and ask questions later has backfired spectacularly

Midweek View: The FCA must hold itself to at least as high standards as it would expect of a listed company

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.

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?