Britain’s financial regulator has appointed a lawyer to lead an inquiry into how it prematurely disclosed details of an upcoming review of the insurance industry. This caused shares in insurance firms to plunge last month. When some of the review’s details were published in a newspaper, shares in insurers including Aviva, Prudential and Legal & General began to fall sharply. Insurance bosses were left infuriated as they waited several hours for the regulator to release the full details of its intentions.
This move has followed complaints made by many in the insurance industry. Some have claimed that the Financial Conduct Authority (FCA) should learn from this lesson and not treat their sector unfairly, while stopping short of calling for the removal of any senior members. The FCA have stated that on Tuesday that they appointed Simon Davis from law firm Clifford Chance to conduct the inquiry. They added that the inquiry would be overseen by a board of non-executive FCA board members. They also set out the terms of reference for the inquiry. Which closely follows what George Osborne laid out to them in a letter last week.
Whether or not this inquiry will satisfy the current FCA critics is yet to be seen. It is known that the Association of British Insurers (ABI) also contacted the FCA, complaining that the FCA should not be allowed to investigate itself. That being said, the ABI refused to comment on their level of satisfaction regarding the framework of the inquiry which was released by the FCA on Tuesday.
The perception of a lack of objectivity or thoroughness on the part of the FCA regarding this inquiry could put them in an uncomfortable position when it comes to investigating anyone in the future. Their credibility will be damaged throughout the industry if it becomes clear that the FCA aren’t being as upfront as they could be. For many, it’s vital that someone assures the regulator will not be wholly responsible for this investigation.
On the topic of legal action, the ABI stated that although it was a definite question when regarding the industry investors, they’d have to wait until they saw the outcome of the internal review made by the regulator before any definite decisions could be made by anyone.
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