FCA's Martin Wheatley has voiced his disappointment in the past about the 'slow progress' banks have made to deliver redress to mis-sold derivatives victims (Photo: Reuters)
FCA's Martin Wheatley (pictured). Clifford Chance Investigating FCA Over Zombie Insurance Review Blunder

The Financial Conduct Authority has hired Simon Davis, a partner at law firm Clifford Chance, to investigate the regulator over staff leaking details of a major insurance investigation to a newspaper, which ended up slicing billions of pounds off insurance company stock values.

However, the watchdog also confirmed it has appointed a committee of non-executive FCA board members to oversee the "independent" review.

The regulator will also follows the UK Chancellor George Osborne's 'terms of reference' after he said he was "profoundly concerned" over the FCA's blunder and wrote to the watchdog himself.

On 28 March, the FCA leaked some of the details about an inquiry into whether 30 million customers of pensions and other products were "exploited" or mis-sold products.

The leak to a British newspaper days before the release of a detailed business plan for the coming year, saw £4bn (€4.8bn, $6.7bn) wiped off insurance stocks within a day.

The FCA refused to confirm the report to the rest of the press for hours after the leak but as insurance stocks plunged as a result, Legal & General urged the watchdog to officially confirm and release details.

It eventually confirmed that it will examine investments languishing in funds that are closed to new business, known as "zombie fund" policies, sold by doorstep salesmen between the 1970s and 2000.

On 31 March, when the regulator should have officially launched the probe, FCA chief executive Martin Wheatley said "whenever markets move like they did on Friday there is always scrutiny."

"This was clearly not the FCA's finest hour but it does serve as a timely reminder to all parties involved of the care and thought that is needed when handling significant amounts of information we hold as part of going about our business."

Influential politician Andrew Tyrie hit back at the FCA's handling of the news and that the watchdog should have handled the issue better.

"On the face of it, this is an extraordinary blunder," said Andrew Tyrie, chairman of the Treasury Select Committee and Parliamentary Commission on Banking Standards.

He added recently that the review into how the details were leaked should be "wholly independent of the regulator."

Meanwhile, the Association of British Insurers (ABI) said the regulator "cannot be permitted to investigate itself".

What Are Zombie Funds?

Zombie funds are closed to new customers and companies can run-off its portfolio of insurance liabilities, until the final policy matures, which may be many years into the future.