An interesting article in the business and finance section of the Telegraph Newspaper by Tim Wallace reports that The Financial Conduct Authority (FCA) is hiring external consultants to review its governance and risk controls on a regular basis following a bungled media briefing last year.
Andrew Tyrie heads the Treasury Select Committee of MPs, and said the FCA failed to live up to the high standards that it sets the firms it regulates Photo: PHOTOSHOT
The City regulator has promised to review its own performance every year, and commission external auditors to check up on its progress, as part of a series of reforms in the wake of a bungled announcement of a review into the pensions market.
In March 2014 the Telegraph reported that the FCA’s then-enforcement boss Clive Adamson planned a review of the pensions market, which led to enormous swings in share prices in the sector as the regulator failed to follow up the press briefing with more detailed announcements.
Mr Adamson and media relations boss Zitah McMillan both lost their jobs later in the year, though the FCA insisted their departures were not related to the press briefings.
Following criticism from MPs and its own chairman, the regulator has promised not to brief any media outlets on price-sensitive announcements ahead of their publication, except in very tightly controlled press conferences in the FCA’s offices, immediately prior to the announcements.
Clive Adamson no longer works at the FCA, though the regulator claims his departure was not related to the briefing
The FCA has also agreed to assess its own board’s structure and effectiveness each year.
“The board agrees that as a matter of good corporate governance it is important that its effectiveness is regularly reviewed, and has agreed it will do so on an annual basis,” the FCA said.
It has also “agreed to commission another externally facilitated effectiveness report and we have commissioned Dr Tracy Long of Boardroom Review to produce a review this year. We agree to publish the results”.
This will become a regular event: “The Board has further decided to commission an external review every other year, with an internal review taking place in alternate years.”
The City watchdog set up a new Risk and Compliance Oversight Division this year, and has hired consultants from Oliver Wyman to review its “suitability given the role and remit of the FCA”.
In addition, the regulator is drawing up a plan of its organisation to show which executives are responsible for which parts of the business, to make sure the FCA is subject to the same accountability as the firms it regulates – those businesses also have to explain who is responsible for which bits of work, under the incoming Senior Managers' Regime.
Andrew Tyrie, the MP who chairs the treasury Select Committee that was critical of the FCA’s response to the pensions reports, welcomed the announcements.
Martin Wheatley was ousted this year as chief executive of the FCA, as Chancellor George Osborne signalled he wants the regulator to take a different approach to its work Photo: Will Wintercross
“The FCA made a serious error in March last year. By breaching its own listing rules, it created a false market in life insurance shares. In doing so it put its own statutory objectives at risk,” Mr Tyrie said.
“The regulators should hold themselves to standards at least as high as those they require of the regulated community. The FCA’s standards have been poor, reflecting deep cultural problems in the regulator.”
Meanwhile, the FCA said it would review the process of addressing small businesses' complaints over the way interest rate swaps were mis-sold.
Although the regulator says it believes the process of assessing sales and providing compensation where it is required has worked well, there have been some complaints from customers who still feel mistreated.
However, it will wait until legal action by some SMEs is complete before launching its next review.
Other delays have also arisen around the FCA’s review of complaints that Royal Bank of Scotland’s global restructuring group mistreated small businesses. This review will now progress on an unspecified slower timetable.