UK: Emergency Response II: Press Reports And False Markets


On 10 December 2014 a report1 was published relating to the mishandling of the UK Financial Conduct Authority's (FCA) announcement of its thematic review into certain insurance business. The mishandling resulted in press reports exaggerating the extent of the FCA's review, thereby temporarily causing a disorderly market in insurance company shares.

Many of the failings which have been identified at the FCA can arise in any sector and in any organisation. Energy and commodities companies can therefore learn significant lessons from a closer look at the events which gave rise to the report and how the situation was managed after it had occurred.

This client alert focuses on the importance of careful preparation and the practice of emergency response plans, and the continuing management of emergency situations as they develop. These issues are looked at in the context of the difficulties posed by price sensitive information, interactions with the press and failures to adequately escalate issues as they progress.

For more advice, including in relation to dealing with physical emergencies, please see our other client alert: "Emergency Response in the Energy & Natural Resources Sector: The Lawyers' Perspective, December 2013".2


On the evening of 27 March and the morning of 28 March 2013, the Telegraph newspaper published articles on the front pages of its online and hardcopy editions with the headlines "Savers locked into 'rip-off' pensions and investments may be free to exit, regulators will say"3 and, "Better deal for millions of savers", respectively. The articles were based on an interview and press briefing given to the Telegraph by the FCA.

It reported that the FCA's business plan included an intention to launch an enquiry into 30 million insurance policies between the 1970s and 2000 and suggested that savers may be given free exits from their policies or moved to better deals.

When the financial markets opened for trading in London on 28 March 2013, several companies with potentially affected insurance policies experienced significant drops in share value.

This prompted the FCA to announce that, "We are not planning to individually review 30 million policies, nor do we intend to look at removing exit fees from those policies...this is not a review of the sales practices for these legacy customers and we are not looking at applying current standards retrospectively – for example on exit charges."

Eventually a further press release was required from the FCA and the business plan was published on 31 March 2013.

The inquiry

The non-executive directors of the FCA requested an independent inquiry be conducted in relation to the press briefing which gave rise to the events described above. That report was published on 10 December 2014 (the Report).

Lessons learnt

Have a plan

The importance of a well prepared and practiced emergency response plan cannot be under estimated. The FCA did not have procedures in place for reviewing the content of its press briefings for market sensitive information and were unprepared for the market abuse implications of an incorrect announcement to the market. Similarly, there does not appear to have been procedures in place setting out how the FCA would deal with an emergency of the sort that arose.

While the content of briefings given to the press were, in some instances, subject to additional review by the Supervision Division, this process was not followed without fail and the reviewers were not provided with scenario-based training enabling them to properly assess the information which they were asked to approve.

Escalate early

Once an issue is identified, it must be appropriately escalated. This may require training to identify problems which may not be immediately obvious, and the creation of contact sheets with alternative contacts where necessary.

Following publication of the Telegraph's article, the FCA failed on several occasions to appropriately escalate issues once they were identified. This resulted in over three hours of market disturbance caused by FCA action before the Chief Executive was informed.

The FCA Media Associate who initially gave the interview considered only the factual basis of the Telegraph's article and did not escalate concerns. Instead, primarily positive messages were relayed. Following discovery of the issue, the Director of Supervision attempted to deal with the problem himself. Simultaneously, other areas of the business were also receiving enquiries and information, again without escalation.

If a problem is suspected, it is prudent to escalate it early. More problems are caused by failures to escalate than by false alarms.

Make informed decisions

It is imperative that the decision maker is able to make informed decisions. In emergency situations decisions will often be made under significant pressure. However, serious questions will be asked if a decision maker was not aware of information that he or she had within their control. The FCA fell foul of this, making decisions without first reviewing all of the available information.

Decision makers must be as informed as the situation allows. This may necessitate planning so that sufficient resources can be mobilised in an emergency situation to review, compile and summarise information swiftly.

Delegate responsibility appropriately

Senior individuals will invariably have innumerable pressures on their time and may need to delegate functions in an emergency. Identification of appropriate personnel is important and must be planned in advance.

It may be appropriate to call executives together urgently in order to gather the relevant expertise quickly. This will again necessitate planning in order to achieve this efficiently.

At the FCA, in some cases senior individuals realised there was a major problem but then instructed the wrong people within the organisation to deal with it. As a result, formal announcements to the market were delayed, while unnecessary efforts were expended elsewhere.

Manage documents

Documents must be efficiently created and reviewed prior to release to the public. The importance of face-to-face discussions cannot be underestimated. Again, it may be most efficient to call executive meetings or speak with people directly. Over-reliance on email is to be avoided.

In the FCA's case, the Chief Executive's method for finalising its statement was criticised in the Report. Instead of gathering key people together in a meeting or via conference call to quickly finalise the document, comments were received in a piecemeal fashion via his secretary. This considerably delayed the issuance of the statement.

Manage the media

The media must be carefully handled at all times in order to avoid misunderstandings and possible reputational damage. In this instance, the emergency arose because of failures in dealing with the media, but in other situations an emergency can be exacerbated by the handling of the media. In the FCA's case, the Report noted that the interview was not recorded and the FCA allowed quotes to be attributed to an individual who did not, in fact, participate in the interview.

Where possible, appropriately reviewed written statements are preferable to oral interviews.4 If this is not possible, interviewees should be briefed beforehand by internal press officers and/or legal counsel and no interviews should be given off-the-cuff. It may be appropriate to answer only predetermined questions and/or record interviews.

In all circumstances, articles should be reviewed prior to publication and the date, time and method of their publication agreed in advance.

Legal advice

The involvement of legal counsel throughout the development of an emergency situation is key. In our experience, many businesses rely on their legal teams to give guidance on their responses to emergency situations.

The Report noted that the General Counsel was not consulted on any of these matters and it is clear the Report's authors thought that legal counsel's input would have been valuable.


Emergencies can arise in any sector and at any time of day or night and will invariably create a pressurised and stressful environment in which poor decisions can be made. It is therefore essential that an emergency response policy is prepared and practiced in advance so that emergencies can be dealt with as and when they arise.

The FCA is only the most recent example of an entity which has emerged from a crisis with better developed procedures and a reduced exposure to risks. Let's learn from them. 





4. It is noted that this was the approach adopted by the Telegraph itself when interviews were sought for the Report.

Client Alert 2014-328

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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