Chancellor George Osborne has expressed “profound concern” to the regulator over the handling of its announcement of the review into closed book policies.
The Daily Telegraph first reported on 28 March that the regulator 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 report prompted several insurers’ share price to plummet, including Resolution, Legal & General, Aviva and Phoenix.
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.
Over the weekend, the FCA came under fire for its response and it was reported that insurers had called for Wheatley to resign over the issue.
In a letter to FCA chairman John Griffith-Jones published today, Osborne says the regulator’s handling of the affair has been damaging both to the FCA and the UK’s reputation for regulatory stability and competence.
He says: “I expect you and the FCA board to do everything possible to make good that damage.”
Osborne says the starting point for the FCA’s investigation must be that it holds itself to the same standards it would expect of a listed company handling market-sensitive information, and hold its staff to the same standards it would expect of any approved person.
He says: “Questions such as the need for disciplinary action for individuals should be considered in this spirit.”
In a speech at City Week 2014 yesterday, FCA chief executive Martin Wheatley said the regulator’s handling of the issue “was not its finest hour”.