MPs slam financial watchdog over insurance debacle

By Huw Jones LONDON (Reuters) - Britain's financial regulator broke its own rules by failing to keep markets orderly when it mishandled the announcement of a review into life insurance policies, lawmakers said on Friday. In a scathing 89-page report, the lawmakers said the Financial Conduct Authority (FCA) should report back in six months on how it has put its house in order. Panicking investors dumped shares in Aviva, Legal & General and Prudential in March last year after the FCA's head of supervision, Clive Adamson, was quoted in a newspaper as saying the regulator would investigate whether people locked into pension plans were being treated unfairly. The report from parliament's Treasury Select Committee said it had been a "major self-inflicted distraction" from the watchdog's core purpose of making markets work well. "By effectively breaching its own listing rules, the FCA itself created a false market in life insurance shares," committee chairman Andrew Tyrie said. "Had a regulated firm behaved as the FCA did last March, the FCA is likely to have imposed a considerable fine," Tyrie added. The report stopped short of calling for resignations and instead set out several steps the watchdog should take over the next six months and report back. The FCA said it was determined to learn the lessons and ensure this would never happen again, and would study the committee's recommendations. The FCA's executive committee headed by CEO Martin Wheatley should examine communications methods and "poor working relationships" between divisions, the report said. The board, headed by Chairman John Griffith-Jones, should commission an external review of its own effectiveness. The FCA and the Bank of England's Prudential Regulation Authority (PRA) should each produce a map setting out the responsibilities of senior officials in the same way the regulators are asking banks to, the report said. The watchdog should stop briefing select journalists on forthcoming announcements unless it publishes the news at the same time any stories appear in the media, the report added. The FCA should also train its staff on how to handle price-sensitive information. "The evidence from this episode suggests that problems may still exist at the FCA. It is not yet clear to the committee that the FCA has fully grasped this," Tyrie said. The report echoes an independent inquiry published in December that led to Wheatley and other senior FCA officials losing their bonus. (Editing by Mark Potter)