FCA won't waste resources on Royal Mail probe

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The boss of the Financial Conduct Authority has told MPs that there is no evidence of regulatory failure despite the initial 38pc jump in Royal Mail shares

Martin Wheatley, the boss of the Financial Conduct Authority, has told MPs he saw no reason to investigate the flotation of Royal Mail or the bankers involved pouring water on claims that the historic privatisation was mis-managed.

The regulator told the Public Accounts Committee that the immediate 38pc jump in Royal Mail shares was “a bigger increase than most” initial public offerings. But, he argued, there was “nothing to suggest” any regulatory failure.

The MPs called Mr Wheatley after the National Audit Office a report raised concerns about the pricing and the handling of the flotation. The NAO report said taxpayers had lost out on around £750m of profit on the first day of trading in Royal Mail shares as a result. The Business Select Committee has re-called Vince Cable, the Business Secretary, and Michael Fallon, the Business Minister, to answer more questions on the sale on Tuesday morning.

Mr Wheatley told the PAC: “We don’t routinely inquire into anything that happens on the market unless we suspect there is a particular possibility of misconduct,” he said. “We’ve read the NAO report, we’ve seen the observations that have been made and there’s nothing to us that suggests that our resources should be used on an inquiry absent any further information coming out.”

Margaret Hodge, chairwoman of the PAC, said that the initial 38pc rise from the 330p offer price was “a pretty unbelievable jump” and that there was “substantial public interest” that merited a regulatory inquiry.

Mr Wheatley told the MPs that he “understood” that MPs were trying to establish “whether proper value was achieved” in the sale of the delivery company. But he insisted that that was a “different point” to the question of regulatory failure. He said that while “lots of things” would trigger an inquiry, “an IPO that goes on the back of a prospectus and a marketing campaign to a premium does not in itself generate a suspicion of regulatory failure.”

He also dismissed the MPs claims that there was reason to investigate the banks that both advised Royal Mail and bought shares in the IPO. He accepted that some of the banks had potential conflicts of interest between their division but he said “there is nothing in this instance that suggests those conflicts were not properly managed.”
He added that simply “the fact that there are a number of advisers that have asset management arms as part of their businesses” did not “pass the threshold level” for the FCA to decide to investigate.

[beezet]

now thats a surprise.