City watchdog chief loses bonus
The head of the City watchdog has been stripped of his bonus of up to £115,000 after a report criticised its bungled handling of the announcement of an insurance industry probe.
Martin Wheatley, chief executive of the Financial Conduct Authority, lost his annual payout together with three other executives following an independent review into the affair, which saw share prices tumble.
The £3.8 million report from Simon Davis of law firm Clifford Chance said the FCA's strategy had been "high risk, poorly supervised and inadequately controlled".
It centred on an interview given to the Daily Telegraph on the regulator's probe into 30 million financial policies sold between the 1970s and the turn of the millennium.
The inquiry disclosed errors in the way the interview was handled and delays in a response when it became clear that it was sending insurance company shares into free-fall.
It revealed that Clive Adamson, the director of supervision quoted in the article, had not even spoken to the reporter who wrote it, who was given permission to use Mr Adamson's name when reporting the quotes of another official.
Mr Adamson has also been stripped of his bonus for 2013/14 of up to 25% of his salary, or around £73,000. The FCA announced this week that he was to leave and he is expected to depart the regulator in January.
Mr Wheatley would have been in line to receive up to 25% of his £460,000 salary.
Communications director Zitah McMillan, who is also leaving, was also stripped of her bonus, as was director of markets David Lawton. Their bonus figures were not given.
Five other members of the FCA's executive committee saw their bonuses reduced by 25% while the regulator said other disciplinary action had been completed.
FCA chairman John Griffith-Jones said of Mr Davis's report: "We apologise for the mistakes that were made and the shortcomings in systems and controls which his report has revealed.
"I am determined the FCA will learn the lessons and will do our utmost to ensure that a situation like this will never happen again."
Chancellor George Osborne said: "A strong organisation learns from its mistakes and improves as a result. I'm confident that the FCA will do the same."
The Davis report said the FCA's decision to give the briefing had been "well intentioned".
It added: "The strategy and the manner in which it was pursued was, however, high risk, poorly supervised and inadequately controlled.
"When it went wrong, the FCA's reaction was seriously inadequate and fell short of the standards expected of those it regulates."
The report found a lack of awareness within the FCA about how sensitive the information being disclosed was.
But some officials in the supervision division had raised concerns ahead of the interview in that it "piles the misery on to life insurance companies" which had already taken a "battering" from changes recently announced in the Budget.
The division was headed by Mr Adamson who, the report said, should have had enough awareness of the concerns to reconsider whether the Telegraph briefing should have been given.
However the report found that while he had authorised the briefing, he was not aware of the interview taking place and expected to be consulted further before it took place.
Meanwhile Ms McMillan said she did not know of or authorise the pre-briefing to the Telegraph.
The telephone interview was given by Nick Poyntz-Wright, director of long-term savings and pensions. The report said his comments should not have been attributed to Mr Adamson.
The interview focused on the possibility of banning exit fees, which the FCA was later forced to downplay. But no concerns over this focus were passed on and "control over the messaging had been lost".
The article appeared on the Telegraph website at 10pm on March 27, the day before the insurance industry was due to be briefed on the FCA's strategy.
Its contents focusing on exit fees were "almost precisely what the FCA had intended to avoid".
A member of the media team sent his boss a WhatsApp message saying "a bit sensational but sounds about right".
Mr Adamson was sent a link to the story and responded by saying "Thanks - looks good", though he had not read the article.
It was not until mid-morning after Mr Wheatley took charge of events that it was decided a clarifying statement should be issued and there were further delays before it was sent out at 2.27pm.
The report said a holding statement could have been issued explaining there had been "widespread misapprehension".
Mr Griffith-Jones said the FCA had received nine claims from the insurance industry potentially seeking damages over the affair.
He added: "The legal advice is that no compensation is due. Given the good faith with which our people were trying to act, that will not be the outcome."
He backed Mr Wheatley, saying the FCA board had total confidence in him and any errors he made were minor, while he brought the situation under control.
The regulator's chairman also paid tribute to Mr Adamson and Ms McMillan despite the failings identified in the report. They will be paid six months' salary on resigning, with Mr Adamson serving part of his notice.
He also said the way the FCA handled the crisis could be an example to the firms it regulates.
"I think the way the organisation has been open to the report, the relative speed that it has been done, the total clarity, nothing being hidden, and the acceptance of responsibility of the senior people, is quite an interesting template for the industry."