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Clive Adamson: Closed book probe is ‘most serious’ event in FCA’s history

Outgoing FCA director of supervision Clive Adamson believes the bungled closed book briefing was “almost certainly the most serious incident we’ve encountered at the FCA”.

Last week, the Davis inquiry revealed a catalogue of failures at the FCA that led to share prices at insurers’ tumbling following a story in the Daily Telegraph that said the regulator was planning to intervene on “rip-off” pension charges.

At a Treasury select committee hearing today, Labour MP Andy Love questioned Adamson on why chief executive Martin Wheatley was not alerted about the issue sooner.

Love said Adamson should have ignored protocol and immediately informed Wheatley given the gravity of the story’s impact on markets.

Adamson said: “This almost certainly was the most serious incident we’ve encountered in the FCA. I agree, one can only speculate about what might have happened if we had brought together people early, but it still took until 2.27pm to get the announcement out and I think we all regret that.”

Adamson, who resigned prior to the publication of the Davis review, admitted the incident exposed weaknesses in the regulator’s system.

He said: “I would have to agree this event looks like a multiple breakdown of controls.

“It’s quite difficult to explain why there was a widespread breakdown of controls. My only explanation is this has never happened before and particularly a crisis that was self-caused, we’ve had no experience of.”

He added the FCA had not previously had any problems with handling information that could potentially move markets, but admitted there “was a misplaced assumption that the business plan couldn’t have been price sensitive, and that was a mistake”.

FCA director of communications and international Zitah McMillan, who is also due to step down from her role at the regulator, said she would left irrespective of the damning report.

She said she saw the job as a “three-year post” when she took it and “would have gone anyway” because of a disagreement over the regulator’s plans to demote her department.

She said: “Removing communications from the executive committee I fundamentally think is the wrong thing to do.”

McMillan said it was not the FCA’s strategy to use pre-briefings for market sensitive information and that the business plan had not been classified as market sensitive by the team who wrote it.

She admitted there had been a “fundamental breakdown in the control you’d expect to see in a division like mine”.

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. “Closed book probe is ‘most serious’ event in FCA’s history”

    Not bad for a body that’s been around less than 2 yrs !!!!

  2. “most serious event in FCA’s history”

    Given that you are only 18mths old, I bet there are more monumental …. ups on the away ?

    The FCA are “institutionally prejudiced” same people sat at the same desks making and creating the same mistakes in the newest of ways !!

  3. People really ought to look a little closer at the FCA. Company Number 1920623 was in fact incorporated on 07 June 1985. It may have been known by various names since then e.g. Financial Services Authority from 1997 and Financial Conduct Authority since April 2013. However, it remains the same corporate body, and as Adamson clearly demonstrate, the comings and going of its staff have little to do with these various name changes.

    So the most serious event in FCA history? Actually, I would say it was when they were regulating 10 major banks and allowed 5 to fail. Plus there was that other bank where Adamson decided that a crack addict could chair the board. These are more serious failings, surely?

  4. E L Wisty (an only twin) 16th December 2014 at 3:22 pm

    Let’s not be fooled – the FCA isn’t new, and shouldn’t be regarded as such. It’s just the FSA in borrowed clothes.

    As for the “most serious incident”, I vote for CF Arch cru.

  5. When the former chairman of Co-op got it so catastrophically wrong and his incompetence came to the fore, he had to go, but noting he said caused billions to be wiped off share prices. Can someone please ask M Wheatley how he can condone incompetence like this in the senior staff at the FCA, including his own role as he is ultimately responsible? He claims those who have resigned or are leaving are not doing so because they are at fault in the report. Ergo those responsible are still there in senior positions.

  6. “business plan had not been classified as market sensitive by the team who wrote it.”

    Another example of the rule makers and guardians not understanding market place realities.

    And don’t get me started on today’s RDR report.

  7. “FCA had not previously had any problems with handling information that could potentially move markets”. Ahem, I beg to differ (given that the FCA is just a rebadged FSA). Back in 2001, the FSA’s imposition on With Profits funds of draconian new solvency requirements resulted in a succession of massive sell-offs of equities that became such a self-perpetuating downward spiral that the UK stockmarket very nearly imploded. The rot was only halted when the FSA finally woke up to the fact that its very own regulatory requirements were the root cause of the problem, in light of which it softened its requirements and the slide was finally halted.

    So, for Adamson to claim now that FSA/FCA had not previously had any problems with handling information that could potentially move markets really does demonstrate a seriously short memory of the damage that can result from power being wielded irresponsibly.

  8. Talk in riddles they do!

  9. Mr Adamson appears to have forgotten the nigh on catastrophic effects on the UK stock market of the FSA’s imposition of draconian solvency requirements for With Profits funds back in the early 2000’s. The market was in danger of spiralling down the plughole and, once it finally realised that what was happening was the result of those requirements, the FSA was forced to relax those requirements in early 2003.

  10. OK if we are going back to the FSA days !
    How about Margaret Cole branding all life settlements TOXIC ?

  11. @DH – The FSA and FCA days are both the same as they are the same legal entity according to companies house. If they wanted to separate liability then they should have used a new company number.

  12. E L Wisty (an only twin) 17th December 2014 at 11:52 am

    @ DH

    Yes, La Cole was a disaster in search of a catastrophe.

  13. Adamson is talking about the FCA in isolation which has been in existence (in its latest incarnation) for less than 2 yrs. This illustrates the way in which they (regulator) think about themselves.

    The point about Statutory Regulation (in all its previous incarnations PIA FSA FCA) )is that it is hugely damaging and largely unnecessary built merely as a Government ‘Patsie’

    There are too many catastrophic ‘errors’ to recall now !

  14. FCA was FSA was SIB.

    Let me add my own ‘worst example of misregulation’ – the LAUTRO charges fiasco.

    The FCA, oops I mean FSA , investigated nineteen or more firms regarding their use of fictitious charges rather than their own dearer charges. They found these firms at fault yet the impact of the higher charges was to distort the entire endowment/pension illustrations from 1998-2004 resulting in £millions of compensation being paid for mis-selling where it was not due.

    Of course, the mis-selling then helped them resolve the ‘problem’ by introducing the RDR. Now where is that thread . . .

  15. @ Phillip Castle

    Sorry it was thinly veiled contempt, with a snort of derision ?

  16. E L Wisty (an only twin) 17th December 2014 at 2:54 pm

    Pity the TSC didn’t kick off by asking Adamson, “So, had one of your regulated firms inadvertently misled the market to the same extent, what action would the FCA have taken?”.

    Of course, the TSC know that they are toothless when it comes to the FCA, and that it would be an own goal to point out that there is one rule for the regulated and an entirely different one for the regulated.

  17. Just as a side issue ! does anyone know where and when the FCA Christmas Party is ?

    I would like to turn up and have, a mince pie washed down with a pint or two after all I have helped fund it !!

    My invitation must have got lost in the post again this year !

  18. Yes the Regulator is far from perfect, but on this occasion I think they were right on target.

    Let’s not forget that this was brought about because they considered (quite rightly) that clients with With-Profits policies were getting shafted. And so they are. As a tiny example the old Scottish Mutual policies haven’t paid a bonus for years. Invariably when I come across these products (as legacy business – not placed by me) I am shocked by the lousy deals and the shenanigans surrounding the terms and conditions.

    I for one truly believe that the Regulator should have carried out the review as originally envisaged and if the shares of the woebegone life offices suffered it would only have reflected what I consider to be their true value. Remember those offices (Such as Skandia for example) that never dealt in this type of product had no worries on this score. Those that did are the very ones we so bitterly complain about today. Aviva, L&G, The Pru, Resolution, Phoenix etc.

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