FCA Hires Leeson Law Firm For Insurance Probe
The law firm which advised the world's best-known rogue trader has been drafted in to represent the boss of the City watchdog in a probe into a bungled media briefing which wiped billions of pounds from insurers' share prices.
Sky News has learnt that Kingsley Napley, which advised Nick Leeson after the collapse of Barings Bank, is acting for Martin Wheatley, the Financial Conduct Authority (FCA) chief executive and a number of other senior managers during the investigation.
Their legal bills, which are being paid by the FCA, are likely to run to tens of thousands of pounds, industry sources suggested.
Mr Wheatley is said not to have been directly involved in a newspaper briefing about an FCA inquiry into roughly 30 million policies held in so-called 'zombie' insurance funds.
Along with senior colleagues including Clive Adamson, the FCA's director of supervision, he has been interviewed as part of the investigation, which is being led by a partner at Clifford Chance, a top City law firm.
The FCA briefing in March sparked a one-day panic among investors, with billions of pounds being wiped off the value of major insurance companies such as Aviva, Friends Life and Legal & General.
Some companies issued statements during the day complaining that a false market had been allowed to develop in their stock.
The FCA took more than six hours to issue a clarifying statement about the terms of its review, after which many of the companies saw their shares rebound.
After the stock market closed, the regulator issued a further statement in the wake of an emergency board meeting which is said to have been demanded by furious Treasury officials.
"The FCA Board acknowledges the concerns of the market regarding today's press coverage of the FCA's proposed supervisory work on the fair treatment of long standing customers in life insurance. The FCA put out a statement of clarification this afternoon," it said.
"The board will conduct an investigation into the FCA's handling of the issue involving an external law firm, and will share the outcome of this work in due course."
Reports have suggested that Mr Wheatley's position could be threatened by the fiasco, but this is now seen as likely, with insurers and fund managers privately happy to await the outcome of the investigation.
There has, however, been considerable political pressure applied to the FCA, with both Chancellor George Osborne and Andrew Tyrie, chair of the Treasury Select Committee, calling for a rigorous independent probe.
Kingsley Napley's role advising Mr Wheatley is intriguing because the firm's name is one of the most eye-catching in the City.
As well as Mr Leeson, it also acted for the UBS rogue trader Kweku Adoboli, who was sentenced to seven years in prison for unauthorised trading which led to $2.3bn in losses.
In total, the FCA has set aside £1.7m for the cost of the inquiry into its mishandled media briefing, although it has spent only a small fraction of that sum so far.
The FCA and Kingsley Napley declined to comment.