FCA chiefs lose bonuses in wake of scathing external review

11 December 2014 -

Regulator’s response to its own comms error fell short of standards it expects of others, says Clifford Chance report

Jermaine Haughton

Senior figures at the Financial Conduct Authority (FCA) will forego their bonuses, following the publication of an independent report on their mishandling of a high-level probe into practices in the insurance sector. Among the culprits, chief executive Martin Wheatley has cancelled his £115,000 year-end payout after the organisation decided to release sensitive details about its investigation to the Telegraph in March this year, scuppering the entire process.

Based on the information it received, the paper published an article revealing that the FCA was planning to look into 30 million pension policies dating back as far as the 1970s. As a result of this example of poor judgement and communications management, billions of pounds vanished from the share prices of the country’s largest insurance companies.

Conducted by Clifford Chance lawyer Simon Davis, the independent review concluded that the FCA’s communications strategy was “high risk, poorly supervised and inadequately controlled”. Indeed, the report found that the FCA’s response to its own error fell short of the standards the organisation expects of those it regulates.

The FCA has accepted the review’s findings, and has already acted on the disciplinary front with the departures of supervision head Clive Adamson and communications director Zitah McMillan. FCA chairman John Griffith-Jones said: “Simon Davis has produced a comprehensive and rigorous report in which he makes a number of criticisms of the way the FCA handled the launch of the 2014/2015 Business Plan. The Board fully accepts Mr Davis’ criticisms and on behalf of the FCA we apologise for the mistakes that were made and the shortcomings in systems and controls which his report has revealed.”

He added: “Mr Davis also makes a number of recommendations about changes to our systems, processes and ways of working. We accept all of his recommendations and I can confirm that we are now implementing them.”

Davis’ recommendations focus on i) an overhaul of how price-sensitive information is handled, ii) changes to the FCA’s external communications strategy and iii) restructuring of its crisis-response framework to avoid the situation ever occurring again.

In addition, the FCA has promised a series of new reforms to the way it handles risk and communications, such as by introducing special training and awareness initiatives for all staff and agreeing to use new sign-off procedures for all external and internal comms.

Griffith-Jones concluded: “The FCA non-executive directors would like to thank Simon Davis for his thorough investigation. As a regulator we hold ourselves to the highest standards and in this case we fell short. I am determined the FCA will learn the lessons, and we will do our utmost to ensure that a situation like this will never happen again.”

Read the full Davis Report.

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