FCA watchdog opens newspaper leak inquiry after billions wiped off insurers
News of investigation into zombie pensions rattles insurance industry
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Deputy Business Editor
Saturday 29 March 2014
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.
- 1 This is what happens when you tattoo Charmander on yourself, drunk, and with no experience
- 2 BBC election debate: The one photo that summed up the whole 90-minute leaders debate
- 3 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 4 The Batman v Superman: Dawn of Justice trailer has leaked – watch
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
If I’m being racially abused I don’t need a white stranger with a saviour complex to rescue me
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
Russian warships in English Channel 'to conduct anti-aircraft and anti-submarine military drills'
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...