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FCA cost of closed book probe spirals to £2.2m

The FCA has set aside an additional £500,000 to cover the cost of legal advice for senior staff in its closed book review inquiry, sending the total cost of the botched briefing soaring to more than £2m.

The inquiry into the FCA’s bung-led announcement of its review of closed book legacy business, which caused insurers’ share prices to tumble in March, is being carried out by Clifford Chance.

The regulator has also hired law firm Kingsley Napley, which has represented high-profile rogue traders including UBS’s Kweku Adoboli, to advise chief executive Martin Wheatley and other senior staff inv-olved in the probe.

The FCA initially set aside £250,000 for Kingsley Napley and a total of £1.7m for the inquiry. But a Freedom of Information request submitted by Money Marketing reveals Kingsley Napley’s costs have tripled to £750,000, taking the total cost of the inquiry to £2.2m – 30 per cent higher than the initial estimate.

The FoI request shows the costs include £60,000 paid to FTI Consulting for PR advice to the FCA board. So far, the regulator has been invoiced by FTI Consulting for £25,000.

On 28 March, the Daily Telegraph reported that the FCA was set to force insurers to review exit charges on all their legacy policies as part of a closed book investigation. Insurers’ share prices plummeted in the six hours it took the FCA to release a clarification statement on the scope of the review.

Money Marketing understands the regulator decided to set aside £1.7m for the inquiry in the days after the story was published and before the terms of reference of the review were known.

It is understood that some members of the FCA’s internal media relations team are unable to advise the board because they are involved in the inquiry.

Jacksons Wealth Management managing director Pete Matthew says: “This is an insane amount of money to spend on cleaning up the mess for something that should never have happened. For £60,000 of our levies to be spent on a PR firm to handle what was a PR screw-up really sticks in the craw.”

The FCA declined to comment.


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. The Hound of the Compliancevilles! 30th July 2014 at 8:04 am

    Of course we dont know yet it was “botched” or “bungled” as many of these press articles claim……that is a possible outcome we have to all consider!

    I’ve have no doubt there will be some learning points come out of it, but otherwise was the announcement c*cked up, or was it just the markets reaction, fuelled by an underlying lack of confidence in the insurance industry to have been doing the right thing by legacy customers, that really caused the stock market volatility????

    I do wonder what the report will say and if it will be damning as we all think it might

  2. If this was a PLC the director responsible would have been booted and a small portion of the £2.2m used to compensate him with the remainder being retained as profit.

    Given that the FCA is not answerable to any person or organisation this reflects the madness that shows itself as the following

    1. We are not for turning so go away TSC/APFA/BIS – take your pick

    2. We are a responsible regulator and will search diligently to uncover evidence of regulatory wrongdoing…by the way, we’re increasing your fees accordingly.

  3. The corrupt morals at the regulator continue to hold sway. This happened on Martin Wheatley’s watch and all of the people responsible should resign.

    And the Bankers, responsible for billions of pounds, and whose actions have affected us all, are awarded a 7 year long-stop, while small IFAs are responsible until they die.

  4. Julian Stevens 30th July 2014 at 9:52 am

    Incredible. And disgusting.

  5. Here’s a lesson to be learned for the FCA. Next time you’re going to drop a bombshell on the markets, sell short some of the shares of the companies you’re going to sabotage on the QT. Then you can use the resulting profit to pay for the ensuing inquiry. And the cost of releasing a statement along the lines of “while with hindsight… no evidence of deliberate wrongdoing… unjust to single out… lessons to be learned… blah blah…” won’t have to be born by the businesses you’ve just screwed over, adding insult to injury.

  6. brian weatherley 30th July 2014 at 10:21 am

    £2.2 million- but whose money ?

  7. £2.2 mill so far ????? If it was not so appalling it would be laughable. I cannot wait to hear the spin that is put on this by the FCA when the report comes out. On the presumption of course that the report does not already state that “……This seems to have stemmed from a group error so we cannot apportion blame on any one individual for this error………..”
    As Sascha says Important lessons learned, change in system of how we handle these things is in place to ensure it wont happen again, he should definitely not resign as he has important work still to do and is very good at what he is does. Etc etc. It will be brilliant to watch this unfold, but I fear a horrendous outcome that there will be no individual accountability and no job loss. I am not even sure if the culprit in question has been suspended or even put on gardening leave while the probe is ongoing. However if I am wrong in my thoughts and there is a senior employee head(s) to roll, I hope there will be no golden goodbye (for good work done in the past), but passed experience tells us this is unlikely to happen. Any termination that may happen is likely to be phrased in such a way that the wrong-doer will get a goodbye package instead of a kick up the ass and shown the door. The fact there have been no resignations over this really speaks volumes in my view

  8. What a loathsome organisation we have lording it over us.

  9. The thing that really baffles me is; why the expensive inquiry ? Adamson messed (a more appropriate word could have been used) up, they know and we know he messed up, so why have we got to pay for the expensive inquiry ?

    Surely Wheatley has the balls to say look; this is what went wrong this is what we are going to do to fix it let me know how much we have to pay in fines(if anything) and move on, cancel bonuses and benefits for all involved (my preferred choice is to sack the twats) JOB DONE !!!

    £2.2 million ? it will end up more than this, be sure of that !!!

    If I want a can of coke I go and buy one, I don’t go and buy all the equipment and ingredients to make one ?

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