FCA chastises its senior executives, Martin Wheatley waves goodbye to annual bonus

Britain’s financial services regulator, the Financial Conduct Authority (FCA) has begun a complete ground-up revision of its methodology recently, ranging from investing in new means of monitoring the modern, electronic markets that operate today, to standing down certain senior regulatory officials in order to restructure the organization to become more effective.

The restructure does not, however, stop at departmental re-shuffling. The FCA’s CEO, Martin Wheatley, has now come under severe criticism in a report issued by Simon Davis, a senior lawyer at prominent British law company Clifford Chance, lambasting the FCA’s recent methods of handling large scale transgressions within the financial services sector.

As a result of the potentially scathing report by Mr. Davis, it is expected that Mr. Wheatley will lose the entirety of his annual bonus, along with four senior colleagues at the FCA, despite the FCA’s action in conjunction with Swiss and US regulators in bringing the six banks which conducted FX rate manipulation to book last month.

According to a report by the Financial Times, the Davis report was pre-empted by the FCA on Monday this week, culminating in the aforementioned restructuring among the senior ranks and departments at the regulatory authority, in which Tracey McDermott, currently director of enforcement and financial crime, was promoted effectively to replace Mr Adamson as director of supervision and authorisations.

Zitah McMillan, director of communications, will also be leaving, as reported by LeapRate this week. Her replacement will no longer sit on the executive committee or report directly to Mr Wheatley.

The award of bonuses to all nine members of the FCA executive committee was postponed in April pending publication of the Davis report. Last year, according to the Financial Times, Mr Wheatley received an £86,000 bonus as part of his total pay worth £628,000.

Mr Davis was appointed in April to lead an independent investigation into how the watchdog botched its briefing to the Daily Telegraph that it was planning to probe life assurance policies, causing shares in major insurance firms to plummet, with his report being expected criticise the fact that it took several hours before the FCA clarified the remit of its planned review.

British chancellor George Osborne, who has recently showed great interest in establishing London as the capital of financial technology and electronic trading innovation worldwide, criticised the watchdog, stating he was “profoundly concerned” about the situation surrounding the FCA.

The restructure, which was commissioned by the board in November last year, follows an expansion of the FCA’s remit after it took on responsibility for the consumer credit industry earlier this year. Mr Wheatley said: “In the 18 months since the inception of the FCA, we have achieved a lot, and now is the time to sharpen our focus, to look at how we can deliver our objectives and ambitions to the best of our abilities.”

A further four divisions will be created, focusing on strategy and competition, risk, markets policy and international, and market oversight. The changes start on January 5 and will be in place by April. The regulator’s senior managers are expected to be summoned to the parliamentary Treasury select committee later this month to discuss the findings. Among the other top figures in the spotlight is John Griffith-Jones, FCA chairman.

“At first glance the changes announced today look substantial,” said Andrew Tyrie, chairman of the Treasury select committee. “It is also crucial that the FCA learns any lessons that emerge from Mr Davis’s report.

Ms McDermott, who is also an executive board member, has headed various departments across the enforcement and financial crime division over the past decade. She has been responsible for leading investigations into market abuse, insider dealing, retail misconduct and unauthorised business.

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