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Wheatley admits closed book blunder was ‘not FCA’s finest hour’

FCA chief executive Martin Wheatley has admitted the regulator’s handling of media reports surrounding its review into closed book policies was “not the FCA’s finest hour”.

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, it was reported that insurers had called for Wheatley to resign over the issue and The Sunday Times suggests the FCA only put out its first statement of clarification after a phone call between Wheatley and Association of British Insurers chief executive Otto Thoresen. The newspaper said the ABI will write to Chancellor George Osborne to complain about the FCA.

Speaking at City Week 2014 in London yesterday, Wheatley said the FCA had quite rightly come under scrutiny for the way it handled the media reports surrounding the review, adding that he supported an internal investigation into the matter.

He said: “If firms were involved in events like those we saw before the weekend, then we would ask serious questions. It is now incumbent on us to answer the same. That is why I fully support the investigation into Friday’s events announced by our board. We will share the findings publicly in due course.

“This was clearly not the FCA’s finest hour – but it does serve as a timely reminder of the importance to all parties involved in markets of the care and thought that is needed when handling the significant amounts of information we hold as a part of going about our day-to-day business.”


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Soren Lorenson 1st April 2014 at 9:07 am

    It’s time that those at the regulator are treated in the same harsh and uncompromising way that the regulator treat the regulated. At the very least Wheatley should be subjected to a significant fine from his massive salary.

    A percentage of the drop that this error cost those invested in these companies would be appropriate.

  2. Julian Stevens 1st April 2014 at 9:18 am

    Has the FCA yet had any fine hours about which it can boast?

    That aside, I must confess to not being entirely sure what all the fuss is about. It’s been an open secret for many years that legacy customers of many of the closed book companies ARE locked into poor investments by steep exit fees, and that insurers ARE exploiting them by levying heavy ongoing charges to subsidise other parts of the business. The situation might be a great deal better if the insurers in question were prepared to allocate some of their resources to recruiting decent fund managers which, reportedly, they simply haven’t bothered to do.

    All the FCA has announced is that it intends to look into such practices with a view to addressing them and, one would hope, forcing those insurers to offer fairer terms. Aren’t such things supposed to be part of the regulator’s statutory remit?

  3. The FCA seem to want to put right all the ills of yester-year without actually putting right first the ills of today. How are they going to treat the funds under management where the original company no longer exists or has been taken over by someone such as Phoenix? I’ve just listened to the radio this morning and Martin Wheatley was wrapped up in knots by the presenter. Seriously, they have to do much better than this.

  4. The closed book fiasco should have been sorted out years ago however the FCA and forerunners were to busy trying to shoot the advisers to notice.
    Typical, when they try to do something they cock it up.
    Sorry, I am starting to sound like my dad now.

  5. It was same with the “Yoxic Death bonds” announcement in Nov 2011 which froze the Life Dettlements Markey and EEA shareholders have had to endure a ywo year suspension plus anothre 5-7 years before they can get 80% of ytheir investment back. EEa is not entirly blameless but the FSA farce was disgraceful (and endorsed by the Complaints Commissioner and the Treasury – Mark Hoban at the time)

    they don’t seem to learn a thing.

    Instead of noving from posh / expensive offices in Canary wharf to posh/expensive offices nearby, they ought to move them offshore and then pull the plug.

  6. Just wait.

    In an hour and a half it will be past midday and he will pop up and say “April Fool – we never did anything wrong because we are above the Law”.

  7. James Harrington 1st April 2014 at 10:33 am

    There I was thinking this article was highlighting that the FCA was admitting that they have made a mistake…then I realised the date..

    Good one MoneyMarketing, you nearly had me with that one…..

  8. @ Jinker what was the radion programme – if its on the bbc I would love hear it and can listen later? Thanks

  9. From a completely cynical point of view aren’t the life companies impacted just annoyed because they didn’t have time to create a press release defending themselves and were caught off guard by the FCA blabbing before an official announcement?

    The ongoing charges levied on legacy investments and pensions are scandalous. We have more than one client that would suffer 25%+ exit charges should they dare to look for a better deal. I think the FCA are 90% useless so can’t see much point in getting worked up about another example of their incompetence, especially since they are actually looking to deal with a genuine issue.

  10. Nick, I don’t think that’s cynical at all, I think you are spot on.

    Attack is the best form of defence – no-one appears to be asking questions about these horrific closed books, all the attention is on the regulators fairly benign announcement regarding them.

    These insurers are a clever lot and they’ve played this one very well.

  11. Marty | 1 April 2014 12:16 pm

    It was Radio 4 and I was driving back home so it was around the 8am mark.

  12. Nick Wardle | 2 April 2014 9:54 am

    Nick, you’re missing the point a bit. If I held shares in an insurance company and got wind before anyone else the FCA were going to conduct a review of this type, which in all probability would cause my shares to instantly drop in value what action do you think I would take? Not that hard to work out is it?

    The point of releasing sensitive market information to all concerned parties is so the above scenario is unlikely to happen. Or, gives everybody the same market opportunities at least. What you wouldn’t want to facilitate is someone with advance warning having the opportunity to dump their insurance companies shares before this announcement as that would give them a market advantage. A big no-no I would think. The FCA internal enquiry will no doubt take care of what Martin Wheatley has already called ‘not the FCA’s finest hour’. ROTFL.

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