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MPs call for review of ‘dysfunctional’ FCA over closed book probe

MPs have called for the FCA board to review its role and suggest the regulator’s handling of its review into closed book policies last year indicates wider problems within the FCA.

In a highly critical report, the Treasury select committee attacks the FCA over its decision to brief the Daily Telegraph last March about a review the regulator was planning into providers’ back books. Following the newspaper report share prices in major insurers tumbled, with the FCA taking hours to issue a clarification statement to the market.

The TSC report into what went wrong, published today, says the actions of the FCA “created a false market” in insurers’ shares, and that the regulator’s response was “seriously inadequate”.

MPs echo the findings of the inquiry by Clifford Chance partner Simon Davis in December, which set out the catalogue of regulatory failings in detail.

Treasury select committee chairman Andrew Tyrie says: “Simon Davis concluded that “the system broke down”, and the overall impression left by the multiple failures he identified is of a dysfunctional organisation.

“The events of 27 and 28 March have been a major self-inflicted distraction from the FCA’s core purpose: ensuring that markets work well. It is not clear that the FCA has yet fully grasped the extent of the failings revealed by Simon Davis’s report.”

The TSC recommends that:

  •      The FCA’s senior management team review its communications and poor internal working relationships;
  •      Non-executive board members should investigate whether the FCA does not share expertise in the way it needs to;
  •      The FCA board should commission an external review into its effectiveness and its approach to managing risk;
  •      The regulator should create a “responsibilities map”, as is the case for banks, clearly showing where senior responsibility lies.

Tyrie adds: “Individually, most of these pieces of work, and the remedial proposals of the Davis report, focus on relatively specific questions about the operation of the FCA. Taken together, they amount to an examination of whether the FCA is suffering from a systemic weakness in standards and culture.

“The FCA should prioritise this work, which is essential for the FCA to be able to assure itself and Parliament that it is not suffering systemic weaknesses.”

The TSC says it expects the FCA to publish its findings within six months.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Tip of the Iceberg?? Let’s hope this ship sinks without trace as it’s certainly “Not Fit For Purpose”!!!!!!!!!

  2. Incompetent Regulators 27th March 2015 at 9:34 am

    Burn the FCA down!

  3. So why aren’t all these indignant MP’s (including Andrew Tyrie) calling for the creation of a Statutory Independent Regulatory Oversight Committee? If they want the FCA to be properly accountable, surely that’s the only way it can come about? And such a committee need not be in the form of another expensive quango for which the industry would have to pay — give the TSC proper powers to impose enforceable directives on a whole range of issues instead of just asking questions that the FCA remains presently free merely to brush aside or even flatly reject.

    “The TSC recommends that….” So what? The FCA is under no enforceable obligation to take a scrap of notice of any of these recommendations and its lack of accountability is the fundamental core of the problem. Recommendations from the TSC and another costly review aren’t going to solve that.

  4. Recently I have been showing my clients the headlines concerning the FCA, FSCS and FOS. I have been showing them the levies and cost to us and explaining how the system works including the debate about a legal long stop. Without exception all have stated the system is both unfair and incorrect. All have questioned why unregulated investments should be covered even if sold via a regulated adviser. All have questioned why we are allowing this unjust system to continue.

    The only way any of this will change is to make the regulatory bodies accountable and to have their errors paid for via the Governments budget. The whole system needs to be reviewed, regulators made accountable and how the whole system is funded.

    There is no doubt in my mind that if the Government had to fund the regulator they would not be getting a 10% increase in their funding. They only are able to gain this as we have no recourse to appeal, which in itself is not democratic.

  5. I have spent most of this week calculating my budgets for the coming 12 mths, which has resulted in IT cuts, salary cuts, and consumable’s cuts, to accommodate un-reasonable regulatory rises !

    This means for me and for my company, I cant accommodate any kind of expansion or company investment. This in turn increases regulatory risk for me and my company as I am having to cut back on the very real and needed support to run a good compliant business and indeed increases work load !

    I cant withhold fees and levies (god knows I have tried) as I simply would just be struck off, labelled “not fit and proper” !!

    I welcome political pressure as its the only way we will see change from this unrelenting monster that is the FCA, and its hangers on (FOS MAS FSCS Treasury) my only concern is time scale ? it will be years, but we need changes in days and months !

  6. Enjoying as it does statutory immunity from just about everything and anything, the FCA is completely impervious to political pressure. Even the oversight of the NAO is a hollow, token sham (it certainly doesn’t result in any sort of fiscal probity does it?), whilst its occasional appearances before the TSC are just charades.

    Andrew Tyrie: The committee considers there to be a strong moral argument for the FCA to reimburse intermediaries the £118m they were overcharged by your organisation over the past five years.

    Wheatley: No.

    End of discussion.

    APFA calls for a three year freeze on regulatory costs.

    A week later the FCA announces a 10% increase to its levies and the FSCS announces another interim levy, this one for £20m.

    And so it goes.

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