Britain’s financial regulator has appointed an independent lawyer to lead an inquiry into how it prematurely disclosed details of a review of the insurance industry, which in turn sent shares in insurance firms plunging last month.
The move follows complaints from the insurance industry body, which called on the Financial Conduct Authority (FCA) to learn lessons from the incident, but stopped short of demanding the removal of senior staff.
When some of the review’s details were published in a newspaper last month, shares in certain insurers fell sharply. Insurance bosses were angered as they waited several hours for the regulator to outline its full intentions.
The incident was described by Martin Wheatley (head of the FCA) as “not our finest hour”.
The regulator has said the inquiry would be overseen by a committee of non-executive FCA board members and that it had appointed Simon Davis, a partner at law firm Clifford Chance to conduct the inquiry.
The FCA set out “terms of reference” for the inquiry which followed closely what Chancellor George Osborne laid out in a letter to the regulator last week.
We will wait to see whether the inquiry would satisfy the regulator’s critics as in a recent letter to the FCA on April 1 the Association of British Insurers (ABI) said the regulator “cannot be permitted to investigate itself”.
It declined to comment when asked if it was satisfied with the framework of the inquiry announced by the FCA on Tuesday.
“This is very much a situation in which even the perception of a lack of objectivity or thoroughness could be damaging to the FCA and its aims,” ABI Director General Otto Thoresen said in the letter.
Thoresen told a committee of lawmakers on Tuesday that he was not seeking Martin Wheatley’s removal over the incident but stressed “the importance of learning lessons” and was critical of the FCA’s slowness in clarifying its position.
“We didn’t have a press release, we didn’t have a report against which we could compare what was being said,” he told the Treasury Select Committee. “And until we did … it was very, very difficult to give people confidence.”
The committee’s chairman, Andrew Tyrie, said it would shortly be meeting the lawyer leading the FCA inquiry.
“It is vital that this investigation is wholly independent of the regulator,” Tyrie said in a statement.
Asked whether investors would have grounds for taking legal action against the FCA over the incident, Thoresen said that was “a definite question” but it would have to await the outcome of the internal review of the FCA.