MPs criticise head of City watchdog
The head of the Financial Conduct Authority (FCA) has been personally criticised in a damning report by MPs into its bungled handling of the announcement of an insurance industry investigation last year.
Martin Wheatley, chief executive of the City watchdog, has already been stripped of his bonus of up to £115,000 following an independent review of the blunder which caused a share price plunge in the sector.
Mr Wheatley is now under further pressure after the Commons Treasury Select Committee said the regulator, which replaced the discredited Financial Services Authority, was still hampered by some of the same shortcomings.
It called for a series of reviews and changes which "amount to an examination of whether the FCA is suffering from a systemic weakness in standards and culture".
Committee chairman Andrew Tyrie said the FCA had jeopardised its own objectives of protecting consumers and ensuring that markets function well.
Today's report criticised the "shocking" way it mishandled the briefing of market-sensitive information to the Daily Telegraph.
A resultant newspaper report in March last year, detailing plans for an investigation into 30 million financial policies sold between the 1970s and the turn of the millennium, sent insurance shares tumbling.
It took six hours after the stock market opened for the FCA to make clear that the scope of the investigation was narrower than initially reported, and not likely to involve axing exit penalties on old contracts.
Mr Tyrie said: "The FCA made a serious error in March last year. In doing so it put its own statutory objectives at risk.
"The evidence from this episode suggests that problems may still exist at the FCA. It is not yet clear to the committee that the FCA has fully grasped this.
"Had a regulated firm behaved as the FCA did last March, the FCA is likely to have imposed a considerable fine. There seems to be one rule for the regulator, and another for the regulated."
The report said the FCA's aim of ensuring media coverage was in part achieved by handing more control over its announcements to journalists than was appropriate, which "inevitably increased the risk of the FCA's intended message being lost".
"It is incorrect to claim, as Martin Wheatley has done, that the communications strategy was not in some way to blame for the events. The committee is concerned that Mr Wheatley still does not acknowledge this."
Mr Tyrie said: "The FCA seems to have lost sight of its overarching objective: to make sure that relevant markets work well.
"The executive committee failed to pay sufficient attention to the risk that its own communications could move the markets. When this risk materialised, they failed to act with sufficient urgency to put things right."
He added: "The FCA's task is a difficult one. From the beginning, it has had to grapple not only with its own challenging role, but with the deficiencies of its predecessor, the Financial Services Authority.
"The FCA has been working hard to address these weaknesses, and to break the link with the failed FSA. On the evidence so far, these efforts to create a more effective conduct regulator are likely to take many years."
A report in December by Simon Davis of law firm Clifford Chance found the FCA's strategy had been "high risk, poorly supervised and inadequately controlled". It saw Mr Wheatley lose his annual bonus together with three other executives.