The so-called Davis review, conducted by Clifford Chance partner Simon Davis and published today, criticises the way the Financial Conduct Authority handled the launch of its Business Plan 2014/15, in particular communication of a proposed review of life assurance, including exit fees.
Davis’s report identifies a clear communications strategy for how the review was to be announced, with Dan Hyde, personal finance editor at The Telegraph, selected specifically to be briefed on the subject of the review into life assurance and exit fees.
However, the strategy appears to have broken down at the point of the actual interview in which Hyde is understood to have focused heavily on exit fees and was seemingly allowed to complete the interview under the impression the FCA would be taking retrospective action against companies, which was untrue.
Furthermore, once the story, entitled “Savers locked into ‘rip off’ pensions and investments may be free to exit, regulators will say”, was published on the night of the 27 March 2014 on The Telegraph’s website, the FCA was slow to respond.
The report noted that the press officer who had been responsible for the interview with Hyde did not appreciate the potential impact of the story on the share prices of life companies the following day, simply sending a Whatsapp message to their superior on the article which said: “A bit sensational but seems about right.”
Specifically about the behaviour of the “media associate” the Davis report stated: “The media associate, in our view, focused on the positive outcome of a high profile story for the FCA, without appreciating the negative consequences for the life industry when the markets opened the next day”.
"Seriously inadequate"
A less sensational story was then published on the newspaper’s front page the following day, yet still the FCA were slow to react, taking a number of hours before publishing a clarification, by which time the share prices of a number of companies had already taken a battering.
This all also occurred shortly after the government announced its new Pension Flexibility rules, something which had already taken its toll on the life industry in the UK, a fact not lost on one executive who urged the media briefing not to take place as it would further “pile misery onto life companies”.
Following publication of the report, a number of companies considered taking legal action against the FCA and an official compliant was made by the Association of British Insurers. Even the chancellor George Osborne criticised the way the FCA had handled the announcement.
The report noted: “The FCA’s strategy of giving an advance briefing to The Telegraph in relation to the scope of the Life Insurance Review was well intentioned: the FCA had sought to avoid the nature and scope of the Life Insurance Review being misunderstood when it was announced for the first time in the Business Plan, to be published on Monday March 31 2014.
“The strategy and the manner in which it was pursued was, however, high risk, poorly supervised and inadequately controlled. When it went wrong, the FCA’s reaction was seriously inadequate and fell short of the standards expected of those it regulates.”
As a result of the report, the FCA said it has “introduced substantial improvement in the procedures relating to the identification, control and release of price sensitive information”.
In addition, the regulator said it had recognised that a number of individuals “made errors” and that therefore chief executive Martin Wheatley, director of supervision, Clive Adamson, director of communications and international, Zitah McMillan and director of markets, David Lawton will not receive a bonus for 2013/14.
