Hello darkness my old friend. The sound of Davis enquiry silence

Earlier this year, seven months ago in fact, the FCA independent directors appointed Clifford Chance litigator Simon Davis to conduct an inquiry into the announcement via The Telegraph, by Clive Adamson, of an investigation into the insurance industry on the 27th and 28th March.

This proved to be quite incendiary as TSC Chairman Andrew Tyrie noted “the FCA may have made an ‘extraordinary blunder’ in allowing market sensitive information about its work to reach the public domain ahead of schedule, thereby creating a disorderly market in shares”.

Tyrie also stated that the “The FCA has a statutory duty to investigate cases of regulatory failure but it cannot be permitted to investigate itself. The board has announced that it will involve an external law firm in its investigation. More than that is needed”.

How independent and quick the enquiry will be is yet to be seen.

In its terms of reference the body said it wanted Mr. Davis to come up with the final report “as quickly as is reasonably possible” following the furore after its intentions to investigate the insurance sector were leaked to The Telegraph .

The stated intention is to publish the report of this enquiry, but with a caveat that publication would be subject to any legal conditions. What such conditions may be remains unstated and what may result is a highly redacted report.

There is a very concise set of FCA imposed protocols that apply to Simon Davis, laying out what he can and cannot do. It further states that he can make recommendations as he ‘sees fit’. There does not appear, to me, any mention that these recommendations will be binding.

The terms of reference were issued on the 8th April, updated on the 2nd May and given press indications that billings so far for the work of Mr Davis had really only just entered six figures, set against a provision of £1.7m it would seem that matters are not progressing “as quickly as is reasonably possible”at all.

As Howard Baker once noted, “It is almost always the cover-up rather than the event that causes trouble”.

We wrote to the FCA in regard to the above enquiry, as it does seem to be taking a very long time indeed. It also appears from what we see to be costing a lot of money and will no doubt cost a lot more.

The request under the Freedom of Information Act 2000 we sent is as follows:

“We understand that in April this year Simon Davis, a partner at law firm Clifford Chance, was appointed to investigate the FCA over staff leaking details of a major insurance investigation to a national newspaper, which ended up slicing billions of pounds off insurance company stock values.

We further understand that the FCA will set aside a provision of £1.7m for the costs of this investigation, based on a preliminary estimate.

Given the consensus view that the FCA really should not investigate itself, and that this investigative process involves a number of key individuals being investigated, can you confirm:

Who they are?

Will the FCA be paying their legal costs?

And if so: 

I would be grateful if you are able to confirm the amount of legal costs the FCA has either set aside or has already paid for providing personal legal representation for those key FCA individuals involved in this investigation?

Finally, is it correct that there are delays being caused to this enquiry as a result of problems relating to reaching agreements regarding the above points?

Many thanks for your assistance”.

We received a reply to our questions which I am sure will be of interest to the adviser community as well as the provider community. It read:

Thank you for your request under the Freedom of Information Act 2000 (the Act), for information relating to the Davis Inquiry, a summary of which (numbered for ease of reference) is attached in Annex A.

Your request has now been considered and I confirm that we hold information that falls within the scope of your request.

However, in relation to point 1, we are not able to provide you with the names of some of the FCA staff (below Head of Department level) involved in the inquiry because this information comprises the individuals’ personal data, therefore Section 40 (Personal Information) of the Act applies.

Furthermore, as stated in paragraph 21 of the published Protocol (link below), Clifford Chance intends to name the relevant senior FCA staff members in the report.   As this is information intended for future publication, we will not be providing it to you because Section 22 (Information intended for future publication) applies. For a detailed explanation as to why the Section 40 and Section 22 exemptions apply please refer to annex B, attached.

FCA Independent Directors Publish Protocol and Updated Terms of Reference:


With regard to points 2 and 3, in replying to a previous request for this information, we have said that, based on an initial estimate, we have set aside £750k for Kingsley Napley’s work on the behalf of members of staff involved in the Inquiry, and on the behalf of the FCA to assist with the Inquiry. We have committed to publish the final cost when we publish the report.

Turning to point 4, although this is not a request for information, you should note that no timetable has been set for the completion of this inquiry and there have been no delays caused by the issues you suggest or otherwise.

So, on top of a £1.7m initial cost set aside for Clifford Chance, a further £750k has been set aside for Kingsley Napley, who are to represent FCA staff.

Is it normal, for staff being investigated for possible misconduct in office to have their legal fees paid for by their employer?

In stating that “no timetable has been set for the completion of this inquiry”should the conclusion be reached that something is seriously wrong, after all this statement does not reflect the one boldly made in the terms of reference to see it concluded “as quickly as is reasonably possible”. 

The report is taking a lot of time, could the real reason be that there is an internal legal argument going on here regarding who should/ would or will be hung out to dry that sits outside the original terms of reference.

I am sure firms would not expect to see the FCA covering their legal costs in the event of an FCA investigation, so why should FCA staff have their legal costs covered in this way?

Could it also be that if individuals at the regulator are seen to be at faultinvestors would have grounds for taking legal action against the FCA over the incident. The ABI Director General Otto Thoresen reckoned it was “a definite question” but it would have to await the outcome of the internal review of the FCA.

Otherwise why would £750k be set aside to cover staff legal costs, with more to follow no doubt?

Will we ever be told?

As Paul Simon once sang, “the words of the prophets are written on the subway walls, and tenement halls. And whispered in the sound of silence”.


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