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Markets Regulation
FCA chief says regulator ‘went too far’
From the Financial Times of Tue, 16 Dec 2014 18:10:09 GMT
Martin Wheatley, chief executive officer of the U.K. Financial Conduct Authority (FCA)©Bloomberg

Martin Wheatley, FCA chief executive

The UK regulator’s outgoing chief of supervision has acknowledged that the watchdog has taken an excessively aggressive tone in its dealings with the City, tapping into a complaint that is regularly levelled by financial services groups.

Clive Adamson — who last week announced his departure from the Financial Conduct Authority just before an excoriating report was published in which he was personally criticised — distanced himself from comments once made by the FCA’s chief executive, Martin Wheatley, that pledged to “shoot first and ask questions later”.

While FCA insiders have expressed concern that Mr Wheatley’s comments were misinterpreted — he was speaking early in his tenure about the banning of risky financial products — they were felt by some in the City to be symptomatic of a regulator that was becoming too hawkish and obsessed with headlines.

The Practitioner Panel, the group of industry representatives that monitors and challenges the regulator, said a botched press briefing over FCA plans to review life assurance policies, was “an accident waiting to happen”. There was an “inherent danger in the FCA’s desire to court headlines to raise the profile of its work,” according to an independent report by Simon Davis, a partner at law firm Clifford Chance, published last week into the sequence of events surrounding the briefing.

The Daily Telegraph article that followed the briefing in March caused share prices of the UK’s major insurers to plunge on the misapprehension that the watchdog could ban so-called exit fees from life assurance products. It took the FCA more than 16 hours after publication of the article to put out a corrective statement to the market.

Mr Adamson, giving evidence to the treasury select committee on Tuesday about his role in the debacle, said there was recognition that the regulator had “gone too far” in taking a bellicose stance against the industry it regulates.

“In the early days of the FCA it was important to get our messages in the public domain and within industry. And so we were very overt in doing that. There’s also recognition within the organisation that perhaps we went too far,” Mr Adamson said.

“Rowing back a bit from the ‘shoot first, ask questions later’ approach that you think was perhaps too much in the blood?” asked Andrew Tyrie, chairman of the committee.

“Correct. Yes, that was too far,” Mr Adamson replied. “I have had some reservations about some of our tone.”

‘Rowing back a bit from the “shoot first, ask questions later” approach that you think was perhaps too much in the blood?’ asked Andrew Tyrie. ‘Correct. Yes, that was too far,’ said Mr Adamson. ‘I have had some reservations about some of our tone’

- Treasury select committee

Regulatory experts said the softening of stance was a natural evolution for the watchdog after taking a harder approach to firms during the financial crisis.

“We went from light-touch regulation to a fiercely aggressive US-style approach,” said Chris Brennan, a partner at Addleshaw Goddard. “The pendulum has to swing back eventually.”

Tim Aron, a former regulator at Arnold & Porter, said: “We’re likely to see a move back to pre-crisis style regulation through supervisory relationships but with much more emphasis on early challenges than before.”

Mr Adamson, who as director of supervision oversaw thousands of regulated firms, told the committee that while there was a good policy for escalating issues generally within the organisation, it was too bureaucratic to operate quickly.

“While formal decisions are taken correctly through committees, in a crisis [the FCA] needs to act differently. In a crisis, it just struggled to operate as it’s used to a different way of decision-making,” Mr Adamson said.

He was joined in giving evidence by Zitah McMillan, director of communications. Like Mr Adamson, Ms McMillan’s departure was announced as part of a wider restructuring of the regulator just before the publication of the report by Mr Davis.

Ms McMillan also came in for criticism in the report. Neither she, Mr Adamson nor Mr Wheatley will be receiving their bonuses as a result. Both Ms McMillan and Mr Adamson told the committee they regretted the incident and apologised.

Ms McMillan said she thought the decision to remove the communications director role from the executive committee that oversees the organisation as part of the restructuring was a mistake.

Additional reporting by Sam Fleming in London

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