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Osborne warns of disciplinary action post-FCA zombie fund fiasco

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Osborne warns of disciplinary action post-FCA zombie fund fiasco

Chancellor George Osborne has warned the Financial Conduct Authority that disciplinary action should follow the muddled way it revealed a probe into the insurance industry,

The FT reported that Osborne has said he is 'profoundly concerned' about the way the FCA  revealed it would launch an investigation into life policies sold between 1970 and 2000. It was a move that provoked a sell-off in shares of insurers. He said disciplinary action against those responsible might have to follow.

In a stinging letter to John Griffith-Jones, chairman of the financial watchdog, Osborne said: 'These events go to the heart of the FCA’s responsibility for the integrity and good order of UK financial markets.'

The chancellor added that the release of details of the probe to a single journalist at The Telegraph had been 'damaging both to the FCA as an institution and to UK’s reputation for regulatory stability and competence'.

Griffith-Jones responded to Osborne's letter by commenting that the board of the FCA shared 'similar concerns to your own' about the events and their potential impact on the UK’s reputation in financial services.

'As we announced last week, we intend to do everything possible to address that harm by setting up an independent inquiry,' he wrote.

Osborne's intervention follows a letter from Tidjane Thiam, chief executive of Prudential, who wrote to the Chancellor to complain about the incident.

The Association of British Insurers (ABI) has also called for FCA head Martin Wheatley to resign, according to the Sunday Times.

The paper said the ABI was planning to write a letter to chancellor George Osborne outlining its issues and demanding Wheatley’s resignation.

Reports on the morning of 28 March claimed the FCA would probe 30 million of these so called zombie funds based on comments made by FCA official Clive Adamson.

Investors dumped insurance shares on the reports and an increasingly anxious L&G - which was among the heaviest hit - issued a stock exchange statement demanding clarification on the plans as the market became increasingly 'disorderley'

The regulator eventually issued a statement in the afternoon stressing the investigation would not be as wide-ranging as feared and that modern rules would not be imposed retrospectively.

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