The insurers could seek compensation over the Financial Conduct Authority’s revelation to The Daily Telegraph that it is to look into the possibility of long term policyholders being mistreated through “rip off” schemes with high exit fees.
The Financial Times reports today that city law firm Slaughter & May has produced a four-page legal document identifying three potential allegations of market abuse by the FCA. The allegations relate to selective disclosure of information, the spreading of misleading information and a delay in correcting the false market.
‘There are sufficient grounds here for an investigation into potential market abuse,’ the report reads.
After the announcement, shares in UK insurance provider Phoenix Group fell 18%, while UK holding company Chesnara, which owns Direct Line, fell 11%. Aviva, Legal & General, and Prudential all suffered a maximum drop of 6%, while Standard Life fell 4%.
It then took the FCA six-and-a-half hours to clarify that the inquiry would not be as vast as initially reported.
The incident has caused a significant backlash, with UK chancellor George Osborne writing to FCA chairman John Griffith-Jones earlier this week to say he was “profoundly concerned” with the regulator’s behaviour.
He also “welcomed” the board of the FCA's decision to launch an inquiry into how the announcement was handled.
