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Investors consider legal action over FCA legacy review blunder

Institutional investors are considering legal action against the FCA after the regulator disclosed market sensitive information, resulting in a sell-off of insurance company shares.

According to the FT “half a dozen of the City’s biggest investors” have consulted a law firm about potential compensation claims against the regulator.

This comes after a report in The Daily Telegraph on 28 March suggested the FCA is concerned legacy customers are locked into poor investments by steep exit fees, and insurers may be “exploiting” them by levying large fees to subsidise other parts of the business.

The leak prompted several insurers’ share price to plummet, including Resolution, Legal & General, Aviva, Phoenix and Resolution.

L&G called on the FCA to bring forward the publication of the business plan “in view of the disorderly market.”

The regulator was forced to issue a clarification statement at 2.30pm explaining the scope of the review in more detail. At 6.30pm, the FCA issued a further statement that it would carry out an investigation into its handling of the issue.

Chancellor George Osborne subsequently wrote to FCA chairman John Griffith-Jones expressing his “profound concern” at the way the regulator had handled the announcement. In response, Griffith-Jones said the FCA will do “everything possible” to address the harm caused by the leak.

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  1. A not insignificant obstacle may be the FCA’s statutory immunity from prosecution ~ unless, of course, the government removes it (in the same way as the FSA arbitrariliy confiscated from intermediaries the protection of a long stop against stale complaints) and makes sure that any redress ordered by the courts is not merely lumped on to next year’s levies.

    Regulation of the regulator by hindsight ~ whatever next? I’d love to see it happen so they’d get a taste of their own poisonous medicine.

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