Clifford Chance report calls for substantial improvements to be made across seven areas

An investigation into the events that led to a life insurance gaffe by the FCA and sent shares in big insurance firms to plummet has criticised the regulator’s information briefing strategy as poorly supervised and inadequately controlled.

The report by Simon Davis, a partner at law firm Clifford Chance also said the FCA’s response to the market reaction was seriously inadequate and fell short of the standards expected of those it regulated.

Davis was appointed in April to lead an investigation into how the FCA told the Daily Telegraph it was planning to probe life assurance policies.

The report said the FCA board bears collective responsibility for the inadequate controls but added the regulator’s strategy of giving the advance briefing was well intentioned.

It has also criticised a number of the FCA’s senior team for their failure to escalate the matter to Martin Wheatley.

The report has called for substantial improvements to be made across several areas including the procedures relating to the identification, control and release of price sensitive information, approach to media and publicity, and the market abuse implications of a wrong decision.

Davis is also recommending that an internal audit should be undertaken to review the approach of the supervision and communications divisions towards the handling of price sensitive information.

In anticipation of the report, the FCA announced an overhaul of its structure, including a number of senior departures. It said the restructure was designed to “sharpen its focus”.  

The FCA’s director of supervision Clive Adamson, communications and international director Zitah McMillan and director of authorisations Victoria Raffé will all leave as part of the overhaul.

Responding to the review FCA chairman John Griffith-Jones said: “The board fully accepts Mr Davis’ criticisms and on behalf of the FCA we apologise for the mistakes that were made and the shortcomings in systems and controls which his report has revealed.

“Mr Davis also makes a number of recommendations about changes to our systems, processes and ways of working. We accept all of his recommendations and I can confirm that we are now implementing them.

“As a regulator we hold ourselves to the highest standards and in this case we fell short. I am determined the FCA will learn the lessons and we will do our utmost to ensure that a situation like this will never happen again.”