Call for FCA probe after 'blunder'
3:48pm Saturday 29th March 2014 in © Press Association 2014
A senior MP has called for an investigation into the financial watchdog, accusing it of an "extraordinary blunder" in releasing market-sensitive information about an insurance industry inquiry which later sent the stock market plummeting.
Andrew Tyrie MP, chairman of the Treasury Committee, said the Financial Conduct Authority (FCA) had breached the "principle" that such information be released to all parties concerned at the same time.
The Daily Telegraph reported yesterday how the FCA was to investigate 30 million financial policies worth £150 billion, sold between the 1970s and the turn of the millennium, amid fears over "rip off" charges and sub-standard service.
The news sent shares in insurance firms slumping into the red once more when the markets opened, after a torrid past week for the sector.
Mr Tyrie, the Conservative MP for Chichester, said today: "This announcement may have led to a disorderly market in shares. It may also have damaged consumer confidence in the industry as a whole.
"On the face of it, this is an extraordinary blunder.
"It is crucial that we have a full and transparent explanation about how such an apparently serious mistake came to be made by our financial services watchdog - the body appointed by Parliament to enforce high standards of conduct."
The FCA said the investigation into insurance policies will start in the summer, scrutinising the treatment of customers who took out products such as private pensions, endowments, investment bonds and life insurance over a 30-year period.
It will unveil further details in its annual business plan for the new financial year on Monday and said it is particularly concerned that many loyal customers of these older policies - many of which are no longer being contributed to - are not getting the same service as new customers and are locked in with high exit penalties preventing them from switching.
The announcement was a fresh blow for the industry just a week after the Chancellor gave pensioners the freedom to draw down as much or as little of their pension pot as they want, removing the need to buy an annuity.
It followed the previous day's pledge by Pensions Minister Steve Webb to launch a "full frontal assault" on pension schemes giving poor value as he announced that a 0.75% cap will be imposed on charges from April next year.
FTSE 100 Index listed Friends Life insurer Resolution, which was set up in 2008 to consolidate the life insurance industry and is a major manager of closed funds, slumped as much as 13%, while Aviva fell 8%, Legal & General dropped 7% and Prudential declined 5%.
Phoenix Holdings, which has five million policyholders and is the UK's largest consolidator of closed life assurance funds, tumbled 15% in the FTSE 250 Index.
Mr Tyrie called for the investigation into the FCA's release of information to be led by an independent figure and any report should be published in full.
He said: "Responsibility for the FCA's work on this should lie not with the board as a whole but with the independent directors alone, led by the chairman.
"This is an early test of their essential role in exercising oversight of the executives and ensuring that they meet the same high standards expected of the industry."
The FCA declined to comment.