Oral evidence: Press Briefing of Information in the Financial Conduct Authority’s 2014/15 Business Plan, HC 881Wednesday 7 January 2015

Oral evidence, 7 January 2015.

Witnesses

Graham Beale, Chairman, Practitioner Panel, FCA, Andrew Turberville Smith, Chairman, Smaller Business Practitioner Panel, FCA, and Paul Swann, Chairman, Markets Practitioner Panel, FCA, gave evidence.

Chair

Thank you very much for coming to give evidence to us this afternoon. You will have heard the previous evidence as you were all here. I opened with some very general questions about the FCA’s performance. It has been in operation for 21 months. Perhaps I can begin with you, Mr Swann, because you are in the middle. How do you rate its performance?

Paul Swann

Its performance has been well aligned with the objectives that were set out with the new regulatory regime that was implemented with the changes two years ago. It has developed a very productive dialogue with the industry. My role in that structure is chairing the Markets Practitioner Panel, which has had a structured, ongoing dialogue with the executive of the FCA. The early indications, from the market’s perspective, are positive.

Chair

Mr Turberville Smith, do you agree with that?

Andrew Turberville Smith

Yes, I do. From the smaller firm’s perspective, the first year of the FCA was well trailed and, from a supervisory perspective, in line with what seemed a sensible, risk-based approach. That has continued in the second year.

Chair

One of the conclusions of the Practitioner Panel was that the industry only ever gets bad press, wasn’t it? You seem to be saying that you are happy with the way that the FCA is going about its business.

Paul Swann

I can respond to that from the Markets Practitioner Panel perspective. I will leave it to my colleague, Mr Beale, to respond to it from the Practitioner Panel—one of the three statutory panels. The dialogue that the Markets Practitioner Panel has been having with the executive around communication has been different from the core of the subject for this afternoon. The dialogue has really been around the broader engagement of the communications strategy in relation to markets rather than consumers, specifically the dialogue at an international level in relation to regulatory reform. The context, from the Markets Practitioner Panel’s perspective, is very different from the context of the Davis review.

Chair

Let’s go to Mr Beale. Thank you very much for coming to give evidence. In your report to the FCA’s board meeting on 1 April, you wrote, “Concern has been growing within the Panel for some time over the degree of open interaction achieved with the FCA leadership”. What did you mean by that?

Graham Beale

For a long time we have been talking about the communications strategy—the lack of balance in the messages and our concern that there will come a point where, instead of helping to rebuild confidence within the marketplace, overly negative reporting will start to undermine confidence and become part of the problem. We have had some very constructive dialogue with certain members of the FCA executive team. You referenced Clive Adamson earlier; we have had a constructive dialogue with him and he is listening to us. We do not always agree, but he takes on board what we say and there is generally a sensible outcome. We have struggled to have the same impact in areas of enforcement and in some of the market study activity. The point that we were making is that the panel is there to give advice when called upon. We feel that there have been occasions where we could have added value and context to some of the thinking that sat behind some of the market reviews in particular that were going on. We do not sense that the resource that is there in the panel has been fully utilised by all parts of the FCA.

Chair

I wanted to come on to that. Your report also states that “a number of members openly questioned the role of the Panel and whether the efforts of members in trying to support a more effective conduct regime are being accepted and capitalised upon”, which—only slightly translated—sounds like the Practitioner Panel is not worth the candle.

Graham Beale

There is frustration within the panel that comments that we have repeatedly made sometimes go into a black hole. After each meeting, we report to the FCA board. We have regular contact with the chairman and the chief executive; they listen and tell us that they take value from the board dialogue, but we do not get any feedback as a result of that, so it is difficult for us to determine whether we are having a beneficial impact or not. One of the consequences of the April board report is that Martin Wheatley volunteered that one of his executive team, Victoria Raffe, would work with me and the panel to see if we can find a better way or a more constructive level of engagement. Since that review, a member of the executive sits in on most but not all the panel meetings, so that we can have a dialogue and an exchange in real time, rather than writing a report that we then do not get feedback on. It is early days in terms of the changes, but it makes for a more productive session when we can engage directly with a member of the executive team.

Chair

Another line in your report is: “The Panel encounters varying levels of co-operation between members of the Executive Committee.” In others words, you do not get co-operation from some. Which divisions did you not get co-operation from?

Graham Beale

Let me first of all expand on what we are saying there. We have never not had co-operation; it is more the extent to which certain members of the FCA see us as an opportunity to explore thinking and confirm their understanding of a situation—I go back to supervision as a good example where we felt that we had that level of engagement—whereas with others, there is a duty for them to consult with us. I guess that lip service is one way of conveying that, at times, we felt that they were going through the process rather than truly trying to engage. The area where we have had the biggest debate on the level of engagement is within the market studies team. There has been some detailed debate on that point. Interestingly—this is sort of germane to the whole issue around market-sensitive data—the explanation we have received back is that there are elements of activity, such as the market studies, that are deemed to be market-sensitive so it would be inappropriate to discuss that with the panel. That is not a point that we agree with, because the panel members have all signed up to confidentiality undertakings. We sit there in private so we can have open debates, and there has never been an issue about any breach of confidence from the panel. For example, when the market study into the cash savings market was published, we gave quite extensive comment on the context and operation of the cash savings market, which we think could have influenced them and probably got them to a better place than they got to from their own resource.

Chair

Back to you, Mr Turberville Smith. Is it not the case that really small businesses feel that they get a raw deal from the regulator? They are pushed around a lot and they often feel that regulation freezes them out. We just heard about barriers to entry developing.

Andrew Turberville Smith

It is quite difficult to generalise across such a broad spectrum of financial services businesses. In many respects, smaller financial services firms work to regulation in a proportionate way. There are large numbers of firms operating in the sector—70,000, or 30,000 if the consumer credit firms are excluded. That would say to me that a number of firms are able to operate within the regulatory environment. Yes, there are certainly some differences around smaller firms’ ability to compete in certain sectors, but that is not to say that smaller firms feel that the regulator freezes them out.

Mark Garnier

Mr Beale, could I come back on some answers you gave to Mr Tyrie about your engagement with senior people at the FCA? When Zitah McMillan came before the Committee she told us that the Practitioner Panel had not provided direct feedback to her or Martin Wheatley about the FCA’s communications strategy. Do you want to comment on that?

Graham Beale

I am not clear why she made that comment.

Mark Garnier

You are aware she made it?

Graham Beale

I am aware she made it—I have seen the transcript of her evidence here—but I cannot comment on why she said that.

Mark Garnier

Can you give us evidence of why she is wrong?

Graham Beale

I went back to the reports that we produce at the end of each meeting. If I go back to commentary on the approach document, which was pre the establishment of the FCA, which was in September 2012, through to June of last year, there were 21 meetings and in 13 of those meetings there was some very clear commentary about the strategy to use the media, the tone and the content of the media briefings and the press releases that were made.

Mark Garnier

This would have required senior people at the FCA to read the minutes of the meetings.

Graham Beale

No, this is a report to the FCA board. It is not a minute. It is a full report, at times quite detailed.

Mark Garnier

I just want to be clear about this because sometimes people misunderstand: you may think you have done everything you need to by writing a report and presenting it to the right people, while she may be thinking that you have not grabbed her in the corridor and said, “I think you ought to read this because we have a serious problem.” Do you think there is an element of that in this?

Graham Beale

No, no. If I go back to the meeting that we had last June, when Zitah presented to the panel a report that was on its way to the board, which is effectively a two-year review of the communication policy, it was put on the table, so we had not had a chance to digest the information in it, but as we turned the pages, there were a number of points we challenged her on. The first was that success in terms of the communications strategy was described in the report as the number of headlines and references made in the media.

Mark Garnier

There were quite a lot of headlines and references in the media in this debacle.

Graham Beale

They recorded that as good and we said, “No, you should look at the content of what is said in the media to determine whether it is good.” The report went on to say that the level of media coverage was much influenced by enforcement activity, which was seen as good, and then there were a number of case studies that effectively described how certain events had been managed to generate publicity. It goes back to the comment in the paper about this being an accident waiting to happen: this extensive pre-briefing and a desire to generate at times sensational headlines are very unhelpful and high risk—I think that is how Simon Davis described it—and without appropriate control around it, it can go horribly wrong, which is what we saw in March.

Mark Garnier

In your 1 April report you said that the events of 28 March were “an unavoidable consequence of the direction of travel of the FCA’s media policy”. That is exactly what you are describing here.

Graham Beale

It is, and in February, the month before March, in our report to the board where we were commenting on the risk outlook, which is a sister document to the business plan, we specifically said that the FCA needed to be very careful about the way that the information was presented, because it could have a market consequence.

Mark Garnier

Mr Turberville Smith, you heard that Zitah McMillan and Martin Wheatley talked about this being an effective way to get the message across to the 72,000 members of the regulator, with the vast majority of those being smaller people. I will ask you the same question as I asked Mr Thoresen: do you think that is a valid, sensible and well thought-through communication strategy or is it just a load of old nonsense?

Andrew Turberville Smith

I don’t think that very often the FCA is seeking to communicate to 72,000 firms in one go. A lot of the announcements that it is making are sector-specific. In that regard, if it is making an announcement to insurance brokers or financial advisors or any other sectors, such as asset managers and wealth managers, they are much smaller numbers than 72,000. We as a panel spend a lot of time talking to them about other methods of communication—simple things around e-mail, more direct communication, trade press, through trade bodies. That proves to be an effective communication channel for getting the message across to smaller firms.

Mark Garnier

Ultimately, each firm will have a compliance officer—someone responsible for compliance, who will be the point of contact for the regulator. Presumably the regulator can send e-mails to the compliance officer.

Andrew Turberville Smith

In the very smallest firms, the managing director is often the compliance director.

Mark Garnier

It is not a problem, is it?

Andrew Turberville Smith

It is not a problem if something is not in the national press, because things that are relevant to your specific sector are hopefully picked up, as I said, through a number of different channels that are perhaps more pertinent to you.

Mark Garnier

Having said that, if a firm was non-compliant and its plea was that the people there were not reading the right newspapers at the right time and did not know what was going on, do you think that that is something that FCA would agree with?

Andrew Turberville Smith

No, because it would come back to the handbook—the rubric on the website is where most of the relevant information is.

Mark Garnier

Fair enough. May I turn to speeches? Anyone may answer this. Clive Adamson was just about to get started on talking about how speeches were less than helpful in delivering the right message and that, in fact, some speeches by staff could perhaps inflame problems, rather than solving them. Can any of you think of an example when this might have happened? Don’t all rush at once.

Graham Beale

I have read the transcript of what Clive said. I am not entirely sure where he was coming from, to be honest. If anything, I would say that speeches over the past 12 or 18 months have been very considered and very carefully put together. The difficulties in terms of sensational headlines occur when things happen off-script, either through interview or through engagement with the press. I cannot think of a speech that has generated a consequence of us having sensational headlines.

Mark Garnier

You did say in the foreword of the July 2014 FCA Practitioner Panel Survey of Regulated Firms that “messages conveyed in speeches by the FCA leadership are not always replicated in firm discussions with the FCA.” Can you give us an example?

Graham Beale

That is a slightly different point. Something that we in the panel identified, and which I think the FCA acknowledges, is that when you talk to the senior team, you can have a very constructive and practical dialogue about some of the practical issues of conduct and compliance, but when you move down to the supervisory teams, they tend to be disinclined to exercise judgment or discretion and they are very rules-oriented. So that very constructive, practical dialogue that you can have with a Clive or a Martin Wheatley is not always translated into the way in which a team operates at the grass-roots level. That is what is behind that comment.

Mark Garnier

Fair enough. Mr Swann or Mr Turberville Smith, now you have had a few minutes to think about it, can you think of any speeches that have been unhelpful?

Paul Swann

I have done as Graham has and looked through the transcripts of all of the evidence that has been given prior to our sessions. The only example I can think of, Clive alluded to in his answer to the question, which was the comment about “shoot first, ask questions later”. That really picks up the point that I think Mr Beale was making, in that that was an off-script addition to the original speech.

Mark Garnier

Mr Turberville Smith?

Andrew Turberville Smith

No.

Mark Garnier

One last question, if I may, just getting back to the overall strategy and the questions I was asking Mr Thoresen. The Consumer Panel seems to agree with this, but do you agree with them that this is actually quite a good way of making sure that consumers of financial services products know what they can expect from the regulator—that it is almost something that should be encouraged in terms of educating the consumer, if you like, but is something that should be discouraged in terms of getting messages across to the regulated, where there may be a far better way of doing that?

Graham Beale

Broad policy, strategy and direction of regulation can be communicated at a macro level. It is right that consumers understand what the regulator is doing, but the way in which you convey these messages is hugely important. Mr Davis concludes that an approach that is based on fact and evidence and that seeks to remove the likelihood of a sensational headline is a better way of communicating than trying to create a set of circumstances in which you are likely to generate a sensational headline. That will lead to an undermining of confidence in financial services from a consumer perspective. One of the big issues that we are dealing with now, post the crisis and all the other scandals, is rebuilding confidence. If we are not careful, this could eventually become part of the problem rather than part of the solution.

Mark Garnier

Do either of the other witnesses want to say anything?

Paul Swann

In the early stages of the evolution of the FCA, it was clear that the new authority needed to establish a dialogue with consumers. The media is clearly a significant part of doing that—ignoring the sensational headlines for a moment. As the regulator becomes more mature and consumers understand the concept of what the Financial Conduct Authority is responsible for, the strategy needs to evolve and develop with that change in recognition. As for understanding where the strategy came from and leading to, it needs to be an ongoing and evolving process of aligning the strategy with the regime as it becomes more mature.

John Thurso

I want to deal with the question of board regulation and governance. I know you all heard the interesting exchange in the last session. Perhaps I could come to you first, Mr Beale. You said earlier that you had made the comment that this was a high-risk strategy—I think you said you had been communicating with the board, and you commented that this was an accident waiting to happen. It would be fair to say, therefore, that the board should have been pretty alive to the scale of risk that might be involved in this communications strategy. Would that be an accurate presumption on my part?

Graham Beale

I think it is a logical conclusion. To build on the earlier questioning, I sat there listening and thinking from my perspective that I would expect any large organisation that has significant influence, whether it is a bank, a corporate body or whatever, to have a risk framework and understand where the sensitivities are in whatever it is doing. There should be a framework in place that seeks to minimise and mitigate any risk that you are dealing with. When we reflect on the events of the last several years, we see that there has been massive industry investment in risk management, putting in risk frameworks and operating the three lines of defence. The regulator should now be an exception to that; it should really have the same framework. That doesn’t stop things happening, but it will minimise and mitigate that risk. What was disappointing for me when I read the Davis report was the absence of a framework and of a set of controls; there was no apparent understanding of where the risks reside within the FCA from its perspective as an operator. In this day and age, and given where we have come from, you would expect that to be in place.

John Thurso

For the clarity of the record, listed companies are required under the various codes—I can never remember which one we are at now; I haven’t been on a board for a few years—to manage risk. They are required to have a risk register, and it is best practice and a requirement that every board go through that, usually in a committee, and that it features on the main board agenda. You have made it clear that you brought it to the board’s attention, so it is unthinkable that the board would not have discussed it and come to some conclusions about the scale of the risk and any mitigation that would be necessary. You would concur?

Graham Beale

I do concur. The board has responded and argued that the use of the media in its communications strategy more generally was a regulatory tool and a way of communicating with the very large number of firms that it regulates. That is not a point that the panel agrees on. We wrote to the board and said it was a point that we would agree to disagree on, because we think it is high-risk. That is a specific point, but the bigger point is the absence of the governance and control framework that you would ordinarily expect to see.

John Thurso

You could easily disagree as to whether it is right to use the strategy, while you could both agree that the dangers need to be properly flushed out and mitigated. Mine is the second point. I think there is a valid argument on the former point, but I am really chasing the other one. I will go down the table and come to Mr Swann next, and then Mr Turberville Smith after that: on this point of governance, were you as surprised as I was by the evidence from the last panel and do you concur with Mr Beale that it is really something that the board should have been more alive to?

Paul Swann

It is a really complex question to answer. It is clear that the regulator itself is not directly exposed to the same strictures and norms as a listed company would be. Whether you would expect them to apply similar or identical processes within a regulator or not is in many ways a question for yourselves, about the way the regulator has been structured and organised, and a question to be asked back to the FCA board and its executive.

John Thurso

Even the House of Commons has, in its Audit Committee, a risk register, with identified risks, mitigating actions and residual risks. That may or may not protect us from some of the things that befall us, and I can tell you that it has not on all occasions, but it seeks to have one. Would you expect any organisation—public, private or whatever—that is competently run to have within it a risk register with that kind of statement?

Paul Swann

I would certainly accept that best practice is that you would have a governance structure that identifies risks to the organisation and seeks to mitigate those.

John Thurso

In all probability the FCA has one and this is a question of whether this risk was properly flushed out or not, rather than whether or not they have one.

Paul Swann

That is exactly the point I was trying to make, Mr Thurso. Whether they apply the same strictures as would be required under the listing code, for example, is a moot point. Whether or not they have a mechanism for identifying and mitigating risks, the best practice is that they should have one. I am not in a position to know what it is or whether there is one.

John Thurso

But without trying to put words in your mouth, you would be pretty surprised if it did not exist?

Paul Swann

I would be surprised if there is not a mechanism for identifying and mitigating risks. Whether it is in the same form or structure that the listing code would require—the way of implementing it—is something for the board and the executive to decide.

John Thurso

Let’s turn to the banker—the man who manages risk.

Andrew Turberville Smith

I was going to say that even smaller firms are required, as regulated entities, to have good governance, controls and risk assessment. So I guess I would be slightly surprised if it proves to be the case that the FCA is lacking in that department, because that is the very least they expect of the smaller firms.

Graham Beale

The FCA does have a board risk committee, because for two successive years I have asked the panel to give views on the risks that the FCA faces. On the first occasion, which was a year ago, we covered a number of risks, internal and external, covering examples of internal risks like the lack of experience, the turnover of staff and the consequence of messaging in the way that we saw play out in March, as well as covering some external risks to the sector. On the second request, which was a year later and is work in progress now, we were asked to focus more specifically on risks to the sector rather than on risks to the FCA. It is clear that there is some dialogue within the FCA about risk management and risks that they need to be alert to.

John Thurso

My last question to you: do you think, following on from that, that the FCA and its board and management are very focused on what they perceive as risks in the areas they regulate and the operation of regulation, because that is what they are there for, and they do not give the same attention to the objective of this particular exercise, which was to say to the public, rather than to practitioners, “Look what good chaps we are”? There was a quote somewhere from the PR side saying something like, “This will get good headlines. We don’t want that boring stuff about how much our plan costs every year. This will prevent that from going ahead.” Do you think that, just because of who they are, they focus on their core purpose and do not see the other side for the risks that they are?

Graham Beale

It is difficult to comment directly because I am not privy to the information that would show that. From reading the Davis report—he had a much deeper insight—I think there is more focus on the external environment than the internal operation of the FCA.

Alok Sharma

You will have heard at the last session that Mr Palmer, in particular, was pressed on the issue of damage to the industry and what would be the result if a market player behaved in the way that the FCA did—effectively, it put market-sensitive information into the market. The FCA itself is statutorily immune to damage actions—it has immunity, at least. Do you think that creates a sense of complacency among senior regulators, because at the end of the day there is no comeback on them?

Graham Beale

I don’t sense that there is complacency. I think some of their thinking, on the earlier question, suggests that it was not as mature as it should be, but I don’t interpret that as complacency on their part. I think they are very aware of their responsibilities, and this was an unfortunate set of circumstances. It perhaps reflects some of the immaturity of the FCA—it is a recently created regulator—but I don’t think they were complacent.

Paul Swann

I would concur with Mr Beale and with the answer that Mr Palmer gave in the previous session. I also concur with Mr Palmer’s comments about the fact that for the regulator to be effective there has to be some degree of protection, otherwise it would become moribund from working out what the effects of its actions would be. The actions therefore would be either delayed or not taken.

Andrew Turberville Smith

I would only add, through the work of the panel that I chair, that they are nothing but conscientious and diligent in the way that they pursue their work. “Complacency” is not a word I would have used.

Alok Sharma

We had a discussion about risk registers and about whether the FCA has something such as that within its operations. In the previous session, Mr Thurso pressed on the issue of who regulates the regulator. The FCA has proposed as part of the senior manager regime for banks that there should be some sort of responsibilities map. They have talked about a governance map for insurers. Do you think that approach should be extended to the FCA itself? Mr Turberville Smith, you might want to take that first.

Andrew Turberville Smith

To some extent, there should be a different approach to the regulated firms, the accountability that they have to comply with and the regulation that they face, as opposed to the regulator. The same approach does not per se apply to the regulator as it does to the regulated firms.

Alok Sharma

I am surprised that you say that. At the end of the day, we had an incident that caused a big issue in the market, which is why we are sitting here having this discussion now. Why shouldn’t individuals within senior regulators be responsible and be named to be responsible in the same way as is being proposed for the industry?

Andrew Turberville Smith

I am not sure what purpose that achieves, over and above—

Alok Sharma

It is about accountability, isn’t it?

Andrew Turberville Smith

What sort of behaviour are you trying to drive by that? From my exposure to them, I feel that they feel that they are accountable for their actions, whether individual or collective. In this case, two senior ExCo members have moved on to different things—not necessarily directly, but they have—

Alok Sharma

To go back to that point, when they came to give evidence, one of them was pretty clear that their reason for going was given not as a result of what happened here but as a result of changes in the way that the FCA operated. It goes back to the heart of responsibility in the FCA. You are talking about two people who went, but were they the right people to have gone?

Andrew Turberville Smith

From my reading of the Davis report, they were two senior people responsible for supervision and communication, which were the two areas most closely related to it.

Alok Sharma

Mr Beale, do you think that there should be some sort of approach in the FCA itself to setting out this governance map and these responsibility areas?

Graham Beale

I do. It goes back to my earlier comment: it is a large, complicated organisation and it therefore needs a degree of governance and control that is consistent with its impact. We have seen the consequences of something going horribly wrong and you should have safeguards in place. I think it is entirely reasonable to expect that, and it should be parallel. You can’t have an exact mirror of something that operates in a commercial environment, but the principles and the desire to understand where risk resides, to try to put mitigation in place and to have a framework whereby when things go wrong you can respond quickly, are just good business practice.

Alok Sharma

Do you think that the FCA currently has the framework? If something like this happened again—we all hope it doesn’t—do you think that it has the framework in place to respond, and that we could look back and say, “This individual was ultimately responsible for the decisions that were taken”?

Graham Beale

I do not think we can answer that question. We have seen the FCA’s response to the Davis report. It says that it will adopt all the recommendations, and we have seen some of that start to occur. One would therefore assume that that puts it in a more robust place. I don’t think that the Davis report went so far as to suggest that there should be a full-blown risk framework and governance model that you would expect as a parallel to something in the corporate environment, but, to the extent that you can replicate that, you should have that framework in place.

Alok Sharma

To what extent do you consider it part of the role of statutory panels to hold the FCA to account for the way in which it conducts all its work?

Graham Beale

I do not think that we are there to hold it to account. The panels were established as a forum for consultation. In the strict sense, if you look at the scope and establishment of the panels, we are a passive panel—we receive requests for consultation, we have no power to do anything else, and the FCA is not obliged to listen to us. I do not think that we are a mechanism. The way that we operate in practice—and to recognise the FCA’s attitude, it is comfortable that we create our own agenda and that we challenge it on points—there is a very good, constructive dialogue between the panel and the FCA. That is how the thing has evolved, but if you go back to the panel’s scope and power per se, it is a passive panel.

Alok Sharma

Would you like it to be less of a passive panel?

Graham Beale

The way we operate now, and if we can continue with the improvements that we started late last year, is effective. It would be entirely inappropriate for regulated firms to be able effectively to challenge and hold the FCA to account. You would have regulatory capture, and that would be not be an appropriate outcome.

Chair

Do you think that, if a company had committed this breach of the listing rules, the regulator’s response would have been similar to that we have seen by the regulator in response to a breach of its own rules?

Graham Beale

I agree with some of the earlier answers to the same question: I think there would have been an enforcement action and the firm would be required to correct and remedy the lack of control framework.

Chair

Do you think there would have been a fine?

Graham Beale

I think it would be highly likely, yes.

Chair

Picking up on something Alok Sharma said a moment ago, on which perhaps all three of you might like to reflect, the panels were inserted into the Financial Services and Markets Act at the request of the Opposition in 1999—I served on the Bill Committee—in the teeth of some opposition. They have generally been held to contribute something, which is why what I read of your paper—parts of which I read out at the beginning of this second hearing—was so concerning. Do you think that there are ways in which Parliament can and should try to build up panel work, to give firms greater confidence that they have a voice that can help counter what they perceive to be the judge, jury and executioner problem and the sense that they are up against an over-mighty regulator? Whether fair or unfair, that is the private feedback which so often comes back.

Andrew Turberville Smith

Perhaps I could start from the smaller firms’ perspective. The panel certainly does not operate as a lobby group. It is very distinct from the sectors that all have their own individual trade bodies. It does engage well with the policy and supervision staff within the FCA on all the other areas that have come across our agenda to give good practitioner feedback, which is very helpful for some of the granularity that goes behind policy and supervision development. I would be nervous if the statutory panel was seen in any way as a lobby group for the industry. There are other bodies that can do that.

Chair

It is specifically because you are not a lobby group—you are in a position, by statute, to ignore what firms maintain and to just say the opposite, if that is what you think is appropriate—that I am raising this point.

Andrew Turberville Smith

I am not sure how far you can go with developing the statutory panels beyond the role that they play at the moment.

Paul Swann

There is a real conundrum around what the scope of the panels’ involvement should be directly with the FCA. The conundrum is really around what the fundamental purpose is of having panels in the first place. I have always viewed the fundamental purpose as the FCA taking soundings from practitioners.

Chair

To act as a sounding board for their ideas. What I am saying is: should they now be developed into something that can also take the initiative?

Paul Swann

Why I wanted to establish what the panels were originally set up to do first was as a lead-in to—there is a very real risk, if the role was to expand, that continuing to get the level of commitment from practitioners at a very senior level in those panels would become increasingly hard. At the moment, the two panels either side of me meet monthly and the Markets Panel meets quarterly. There are a significant number of senior people from the industry who sit on those panels and give up a significant part of their diaries to achieve the input that the FCA needs as a sounding board. If you extend that further, I think that there would be a very real risk that those individuals would not be able to continue to participate and provide the time.

Chair

I will have one more go. The premise of my question was not what the FCA thinks it needs. My premise was what, taken as a whole, public policy might be better served by.

Paul Swann

The point I was trying to make is that I think you would potentially erode the benefits of the current structure if the role was extended.

Chair

So we are at a happy optimum.

Paul Swann

These things evolve and change and they do not ever cease evolving and changing. But beyond that, I think that they are broadly right.

Chair

Mr Beale has had the most time to think about this question.

Graham Beale

I am actually in the same place as my two colleagues. I think that the panel is what it is and we need to keep trying to make that work as best it can. In terms of public voice and having a response at a public level to the FCA, that should be undertaken by the trade bodies. It is what they are there to do. Again, the trade bodies within the UK are quite fragmented. There is a process going on to see if we cannot get some form of consolidation to make them more unified in their thinking. That will then give us a forum through which you can have that more public debate about the direction and the policies coming out of the FCA.

Chair

We do not often see the panels. We are particularly grateful to all three of you for coming in and being so patient in listening to a much longer first session. If there are further points on reflection that any of you want to make, both specifically with respect to the subject of this inquiry or using it more generally as an illustration, do come back to us in writing. We would be interested. We recognise the value of the work that you do, and we get feedback about it from the regulated community. Thank you very much for giving evidence to us this afternoon. Oral evidence: Press briefing of information in the FCA’s 2014/15 Business Plan 2