In a letter to the Financial Conduct Authority’s chairman John Griffith-Jones, George Osborne “welcomed” the FCA’s decision to hold an independent inquiry into the matter, before listing a set of issues he wants to be reviewed.
The controversy comes after The Daily Telegraph on Friday announced that the FCA would launch an inquiry into the exploitation of long term policyholders in its annual business plan three days later.
“These events go to the heart of the FCA’s responsibility for the integrity and good order of UK financial markets, and have been damaging both to the FCA as an institution and to UK’s reputation for regulator stability and competence,” wrote Osborne.
“The starting point must be that the FCA holds itself to at least as high standards as it would expect of a listed company.”
The letter follows yesterday’s speech by FCA chief executive Martin Wheatley, in which he said the leak was “not our finest hour”.
Referring to the stock plunges experienced by many top insurance groups, Wheatley said: “Whenever markets move as they did on Friday, scrutiny rightly follows, and this is no different for the FCA.”
However, in an interview with BBC Radio 4 over the weekend Wheatley said he would not give up his position despite calls for his resignation.
"I'm not in a good position," he said. "I'm not defending that position, but there are processes that have to be gone through."
The FCA originally told The Daily Telegraph that at the heart of its investigation is an “unfairness” whereby some insurers use the returns from closed funds to pay bills from other parts of its business.
It said it would look into customers deemed to be locked into "rip off" pensions and investments and said they may be given a free exit from their scheme, or moved on to a better deal, following the inquiry.
Following the publication of the article, it took six hours for the body to issue a clarification, by which time many stocks had already dropped significantly.
The FCA's board announced yesterday it would look into how the announcement was handled and said it would involve an external legal firm in the inquiry.
The list of issues that Osborne said should be reviewed in the investigation includes:
-Why the information was given to a single journalist;
-Why the clarification statement was issued so long after the announcement;
-To what extent a false or disorderly market in the shares was present during this period;
-What broader lessons these events hold for the regulator’s approach more generally to publicity and the media;
-Where senior accountability should lie and what disciplinary action should be taken.
To see the chancellor's letter to the FCA in full, click here
