The City watchdog has agreed to a rethink of its investigation into the release by a senior regulator of market-sensitive information, after being accused of “marking its own homework”.
The Financial Conduct Authority (FCA) set up the inquiry after hundreds of millions of pounds was wiped from the stock market value of UK life insurers in the wake of a newspaper interview with its director of supervision, Clive Adamson.
The shares only recovered after a “clarification” was issued several hours later.
The affair was seen as a huge error by the new regulator and drew criticism across the board, including from the Chancellor, George Osborne. It led to plans for an inquiry by the FCA’s independent non-executive directors with external legal support.
However, having commissioned the inquiry, the independent directors will now leave its conduct to Clifford Chance, the law firm that recently completed an investigation into lending practices at Royal Bank of Scotland. The investigation will be headed by its partner, Simon Davis.
The interview with Mr Adamson sparked fears that insurers would have to review millions of old policies, prompting a market tremor that only subsided when the regulator made it clear that its work would not involve every policy sold and would simply focus on whether customers were being treated fairly.
The affair sparked fury among insurers, and led to calls for the resignation of the FCA’s chief executive, Martin Wheatley.
Andrew Tyrie, chairman of the Treasury Select Committee, said of the revised review: “It is crucial – now that the FCA’s non-executive directors have commissioned this inquiry – that neither they nor the board play any further role until Mr Davis has completed his final report.
“On the need for the inquiry to be comprehensive, the terms of reference clarify that Mr Davis ‘can examine any other matters he might reasonably consider relevant and make such recommendations as he sees fit’.”
FCA sources were keen to stress that the review in its original form was only intended to be under the oversight of the watchdog’s independent directors.
The revised terms have been agreed with Mr Osborne, with a report set to be published as soon as possible.