By Mark Kleinman, City Editor
Executives at the City watchdog have begun examining criticism of their conduct as part of an inquiry into a media briefing which wiped hundreds of millions of pounds from the value of listed insurance companies.
Sky News has learnt that a number of senior personnel at the Financial Conduct Authority (FCA) have been invited in recent days to scrutinise findings against them in a draft report ordered by a furious George Osborne earlier this year.
The process, known as Maxwellisation, enables individuals named in inquiries to respond to findings against them prior to the publication of a final report.
Simon Davis, a partner at law firm Clifford Chance, was appointed in April to lead the review, which followed a briefing by FCA executives to The Daily Telegraph about proposed supervisory work on the fair treatment of long-standing customers of life insurance companies.
The reporting of the story sparked panicked selling by investors in a string of London-listed insurers such as Aviva, Friends Life and Legal & General amid fears of a draconian regulatory clampdown.
However, the FCA failed to issue a clarifying statement about the terms of its review for more than six hours after trading in their shares had begun.
Among the FCA executives who could face criticism in Mr Davis' final report are Clive Adamson, the director of supervision; Zitah Macmillan, the director of communications; and Martin Wheatley, the chief executive, who is understood to have been abroad at the time of the story's publication.
Although Mr Adamson was quoted in the Daily Telegraph story, sources said that he had not himself been present at the briefing, which is said to have been provided by a more junior FCA executive.
Executives and other board members from insurers have been interviewed as part of Mr Davis' probe, many of whom are said to have been critical of the practice of pre-briefing by the regulator.
Mr Davis, who is reporting to the regulator's non-executive directors, has signalled to lawyers acting for the FCA executives that he intends to publish his final report by the end of the year.
The inquiry's terms of reference require him to examine, among other issues, whether a false market was allowed to develop in the shares of the affected insurance companies.
Sky News revealed in June that the FCA had appointed Kingsley Napley, the firm which represented the rogue trader Nick Leeson, to act for its executives.
Their legal bills, which are being paid by the FCA, are likely to run to tens of thousands of pounds, industry sources say.
The FCA has set aside £1.7m for the cost of the inquiry into its mishandled media briefing, although it has spent only a fraction of that sum so far.
Both the Chancellor and Andrew Tyrie, chair of the Treasury Select Committee, demanded a rigorous independent probe.
The FCA and Clifford Chance declined to comment.
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