FCA watchdog opens newspaper leak inquiry after billions wiped off insurers

News of investigation into zombie pensions rattles insurance industry

Deputy Business Editor

The City’s most powerful watchdog has been humiliated into launching an independent inquiry into a briefing one of its directors gave to a newspaper that wiped billions off the value of insurance companies listed on the London Stock Exchange.

Clive Adamson, the director of supervision at the Financial Conduct Authority (FCA), was quoted in yesterday’s Daily Telegraph as saying the regulator was planning an inquiry into 30 million pensions and savings policies sold from the 1970s to 2000.

He said the FCA would examine concerns that loyal policyholders were being exploited with high fees and bad service, adding that it  would consider banning punitively high exit fees which lock many savers into their poor-value policies. Within seconds of the markets opening, shares in insurance companies crashed as investors took fright at the vast amount of administration the FCA’s plans would incur and the potential mass exodus of client money.

Operators of closed funds, known as zombies, were particularly badly hit, as the newspaper reported that the FCA would be investigating them closely. The watchdog was concerned insurers were using returns from zombie funds to subsidise other parts of their businesses.

In the afternoon, the FCA issued a statement to clarify its position, explaining that it was not looking at applying current sales standards retrospectively. That helped some minor recovery in share prices but insurers still ended the day significantly lower. Phoenix crashed by 21 per cent at one stage before closing down 11 per cent. Resolution fell by 7.1 per cent, Aviva by 3 per cent and Legal & General by 3.5 per cent.

As the rout continued into the afternoon, the FCA’s chairman, John Griffith-Jones, called  an emergency board meeting to discuss the handling of the media briefing. The board decided it should hire an independent City law firm to investigate. Analysts expressed amazement that the regulator had clearly not anticipated such a dramatic fall in share prices, particularly given the collapse in the value of companies selling annuities after the Chancellor’s Budget statement the previous week.

While the terms of the law firm’s review are still to be agreed, it will inevitably explore the appropriateness of selective media briefings on dramatic announcements. 

On Monday, the FCA is expected to publish its full report on its business plan for the next financial year, including its investigation into how long-standing life-insurance customers are treated. The lawyers’ inquiry will explore why it was felt that the organisation needed to pre-brief journalists about the report.

The lawyers will be investigating the role of FCA personnel such as Zitah McMillan, its head of communications. She has worked there for about 18 months, having previously held a similar post at the Department of Work and Pensions. However, the decisions of senior board members, including Mr Adamson, will be the most closely scrutinised. 

Start your day with The Independent, sign up for daily news emails
footballHe started just four months ago
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Arts and Entertainment
(L-R) Amanda Peet as Tina Morris, Melanie Lynskey as Michelle Pierson, Abby Ryder Fortson as Sophie Pierson, Mark Duplass as Brett Pierson and Steve Zissis as Alex Pappas in Togetherness
TV First US networks like HBO shook up drama - now it's comedy's turn
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Pool with a view: the mMarina Bay Sands in Singapore
travel From Haiti and Alaska to Namibia and Iceland
The will of Helen Beatrix Heelis, better known as Beatrix Potter, was among those to be archived
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Nigel Farage: 'I don't know anybody in politics as poor as we are'
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect