During a session on 4 February 2014, the Chairman of the FCA, John Griffith-Jones, asked to take a "rain check" on a request to share their internal audit reports with the Treasury Committee.
Andrew Tyrie responded:
"I think you can take a rain check on a discussion with me about whether any redactions may be necessary. But if you are telling me you want a rain check on whether they can be supplied to the Committee, I think there will be a major problem."
On 3 March 2014, John Griffith-Jones wrote to Andrew Tyrie MP, Chairman of the Treasury Committee to again turn down this request. Griffith-Jones voiced concerns that the publication of internal audit reports would "discourage candor and challenge in the interaction between Internal Audit and other parts of the organisation".
During a session on 9 September 2014, the issue was again raised with the Chairman of the FCA, who said:
"I beg you to consider the arguments about giving us a protected space in which to do our work, of which receiving reports about things that are not quite right, frankly, and putting it right is a wholly necessary part of every organisation’s function. If you shed a spotlight into that in real time, you alter the behaviour of the people in the protected space and make my job more difficult to do regulation work. That is my only reason. I completely understand that if something goes wrong, you hold us to account afterwards, and if you say, “Was there an internal audit report on this, and did you act on it?” that is completely for the public domain."
However in a letter to Andrew Tyrie last week, Griffith-Jones agreed to provide internal audit reports one year after the reports have been provided to the Audit Committee, but remained "anxious about the potential harm that disclosure or publication of audit reports is likely to have".
He also proposed that the content of the reports would be redacted to remove "firm-specific data and other content where disclosure or publication would not be in the public interest" under the Freedom of Information Act, a plan which Tyrie said was "not appropriate" in his response.
Discussing the agreement, Andrew Tyrie said:
"The FCA’s undertaking to publish copies of its internal audit reports is welcome. Still, obtaining it took many requests and a year’s persistent pressure from the Committee.
“As we can see from both the Davis report and the Treasury Committee’s recently published report, the FCA have a lot of work to do. The evidence from this episode suggests that there may be broader problems at the FCA, which range far wider than points of process and procedure. These include the FCA’s communication methods, possible poor working relationships between divisions, the Board’s effectiveness, and insufficient focus by its staff on the FCA’s objectives, among other things.
“The publication of these internal audit reports will better enable Parliament and the public to follow the FCA’s progress in resolving these issues, and in increasing its effectiveness.”
Last week, the Treasury Committee published a report which criticises the FCA for continuing to offer ‘pre-briefings’, and the 'strategic restructuring' which led to Clive Adamson and Zitah McMillan leaving the regulator following a mishandling of a pre-briefing of its Life Insurance Review in March 2014.
The report expressed concern that Martin Wheatley refuses to acknowledge that the FCA’s communications strategy was inevitably to blame for the drop in life insurance shares, and that the FCA has not ruled out giving ‘exclusives’ to individual journalists, which may be published at a time of the journalist’s choosing.
The report concluded that failures took place in multiple divisions of the FCA and at senior as well as junior levels, and that that this must be the responsibility of the Executive Committee. The report said that "if the Executive Committee has failed properly to discharge its responsibilities, then the Board has consequently failed in its duty to oversee and challenge the Executive Committee effectively. It is also clear from the evidence that the Board as a whole failed in its duty to identify and manage risk."
