James Moore: The FCA’s own watchdog is barking loudly - and with justification

Outlook

The law firm Pinsent Masons says the FCA, led by Martin Wheatley, has successfully created a whistleblowing culture among the employees of the businesses it regulates. (ANDREW WINNING/Reuters/Corbis)

The Treasury Select Committee will today take one of its last chances before Parliament’s dissolution to bowl another bouncer at the chest of the Financial Conduct Authority.

The 13th report of its 2014-2015 session is an 83-page evisceration of the regulator. Under the chairmanship of Andrew Tyrie, the committee has got rather good at this sort of thing.

It covers the FCA’s spectacularly mishandled announcement of a review of whether millions of people holding old life insurance policies were being treated fairly by the life insurance industry.

You may remember that the news was handed to a newspaper by way of a briefing with a senior regulator, supervised by a junior press officer. Incredibly the aim of this was to ensure the right message was put out to the market.

As we now know, the converse was true. The market was given the impression that every one of the old policies would have to be reviewed – a massive and hugely costly exercise. Panic ensued, wiping billions of pounds from the value of life insurance shares. It took several hours for the FCA to correct itself.

After quite a bit of to-ing and fro-ing, Simon Davis, a senior lawyer, was hired to conduct an “independent” review of the affair, which resulted in several recommendations for change. The watchdog has since been at pains to point out that it accepted the lot – but the committee is clearly saying “you don’t get it”. And it may have a point.

Certainly my interactions with senior figures at the regulator have left me with the impression that the prevailing view is, accidents happen. We make thousands of hugely important decisions every day, and some are bound to go wrong. This is just one of those instances. So let’s do what the report tells us and move on.

As the committee points out, were a listed company to be found guilty of leaking market-sensitive information to a media outlet prior to an official announcement, as the FCA did – and were its processes found to have been as deficient as the review found the FCA’s to be – it could expect censure and a heavy fine.

Moreover, there wouldn’t be any moving on until the FCA was quite satisfied with the changes the company had made. The committee serves as the FCA’s watchdog and it’s not satisfied.

Perhaps one reason why the FCA doesn’t seem too worried about this is that there will be a general election in a few weeks – and, in all likelihood, a period of chaos before a new administration is sworn in and a new committee is appointed.

Those who might be among the new intake of MPs could reflect, then, on how having a degree of continuity in at least one part of public life might be invaluable – and that someone needs to keep watch over Britain’s financial watchmen. Mr Tyrie and Co have fulfilled that function admirably. Perhaps they should be allowed to continue doing so – if they can be persuaded to do so.