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
News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
news
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower