Aifa warns on 'guilty until proven innocent' approach
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Aifa has warned that the Government’s proposals to publicise information about ongoing enforcement cases marks a worrying shift towards the regulator adopting an attitude of “guilty until proven innocent”.
In its consultation paper on future financial regulation published today the Government reveals plans to legislate to allow the new regulatory body the Financial Conduct Authority to publicise warning notices against firms or individuals and the grounds on which action is being taken.
Until today the FCA was known under the working title of the Consumer Protection and Markets Authority.
But Aifa policy director Andrew Strange (pictured) says: “We are concerned about some of the proposed new powers, particularly publishing the names of firms under preliminary investigation. This is a worrying shift towards guilty until proved innocent.”
City law firm Reynolds Porter Chamberlain agrees that information relating to an enforcement investigation should not be published before the investigation has been completed.
Regulatory partner Steven Francis says: “By pre-emptively informing a firm’s clients of its investigation the new regulator could do serious damage to the firm’s reputation and business. The FSA regularly commences investigations that lead to no disciplinary outcome. The firm either satisfies the FSA there has been no wrongdoing or the FSA simply gets it wrong.
“The Government will therefore have to tread very carefully when implementing this power. The FSA must respect the principle of ‘ innocent until proved guilty’. The mere fact of an investigation simply should not be publicised until there has been an evidence-based determination.”
The Government is also planning to legislate to give the FCA the power to ban products for up to one year to prevent consumer detriment.
PricewaterhouseCoopers regulatory director David Kenmir says: “Financial services firms have to face up to the tough reality of a more intrusive and onerous regulatory system. The proposal to hand the FCA powers to ban products, or limit their distribution for up to 12 months, will fundamentally change how financial services companies create and sell their products and is likely to make life a lot more difficult.”
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Readers' comments (9)
Anonymous | 17 Feb 2011 3:47 pm
PricewaterhouseCoopers regulatory director David Kenmir says: “Financial services firms have to face up to the tough reality of a more intrusive and onerous regulatory system. The proposal to hand the FCA powers to ban products, or limit their distribution for up to 12 months, will fundamentally change how financial services companies create and sell their products and is likely to make life a lot more difficult.”
Or they could just quit and then where would we all be? including PWC!
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Michael Fallas | 17 Feb 2011 4:17 pm
One can only assume IFA's have no "human rights" under our present syatem and looks like our new system of regulation as well.
If what AIFA is reporting is correct they are right to raise this concern and I hope this new regulatory authority whatever it is called, as they can't even get that right, have good lawyers.
One can only assume they will all be protected by statue from any wroing-doing as the FSA is, so in effect they can do what they like and we all pay either way, and oh do "be afraid".
Not progress in my view but welcome to the new "risk free" world we seem to be creating especially in financial services. Sadly this "free of risk" society we seem to be creating is going to get very expensive, but it keeps those regulators in a good lifesytle though.
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Anonymous | 17 Feb 2011 8:55 pm
We maybe should be looking towards an action group such as Liberty for support, they have years of experience fighting for human rights and civil liberties?
Maybe we all should be approaching them?
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Evan Owen | 17 Feb 2011 8:59 pm
Innocence or ignorance?
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Julian Stevens | 17 Feb 2011 9:05 pm
And the FSA's response to AIFA's concerns is......?
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Paul Cross | 18 Feb 2011 8:19 am
So 'Aifa warns' do they? FSA must be quaking in their boots.
The words 'chocolate' and 'fireguard' spring to mind yet again.
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Devil's Advocate | 19 Feb 2011 9:44 am
I thought the FSA had always worked on the premise of 'guilty until you can prove yourself innocent' or was that just for IFAs
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Neil F Liversidge | 19 Feb 2011 9:48 am
I am not a lawyer but my understanding of libel law is that a defendant is likely to be guilty of libel if he recklessly makes a statement which the plaintiff deems defamatory. If a statement is made, which harms a firm or individual's reputation, before guilt is established then I would suggest that is be definition an act of recklessness. It does not end there though. Any damages will be paid from the funds we are compelled to supply, ergo the regulator is being reckless and failing in its duty of care to those who are compelled to fund it - us.
Imagine what the regulator would say if we placed our clients at risk in such a fashion?
More work for the lawyers, more cost for us. We are ruled by nitwits.
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Bill Warren | 19 Feb 2011 11:23 am
Well done Andrew Strange and AIFA for raising this concern which has been at the core of our legal system for years.There has been a deadly hush since this particular announcement was made and whilst the industry may be punch drunk with announcements and attempted government "guidance" the industry needs to keep communicating with MPs to get common sense and fairness to advisory firms/advisers to prevail.
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