FSA figures show dangers of Govt early alert plan
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FSA figures reveal nearly a third of enforcement cases in 2009/10 did not result in disciplinary action, raising concerns over new regulatory powers to publicise “intended” enforcement action.
A Treasury consultation paper on the new regulatory framework, published last week, outlines plans to grant the Financial Conduct Authority power to publicise warning notices about firms and individuals, which signal the start of formal enforcement proceedings.
Aifa warns the new powers could signal “a worrying shift towards guilty until proven innocent”. The FCA would be able to publish details about ongoing enforcement cases before the firm or individual involved is given the chance to present and argue their case.
Figures obtained by Money Marketing from the FSA’s enforcement annual performance accounts for 2009/10 show 114 enforcement cases were concluded, excluding cases where firms failed to meet the FSA’s minimum threshold conditions. Of the 114 cases, 79 cases resulted in public disciplinary action and 35 were dropped after the warning notice stage.
Aifa director Robert Sinclair says: “This has significant risks for firms because there is a large gap between suspicion of wrongdoing and final evidence.”
Thameside director Tom Kean says: “If the FCA is given these powers, there would be uproar.”
CMS Cameron McKenna partner Simon Morris says: “It is immensely damaging for a notice to be put out without necessarily any substance to it. What the regulator would be doing is shouting allegations through a megaphone, very often before they have been put to the firm and before the evidence has been obtained.It is highly dangerous, highly damaging and highly unsatisfactory. I think it is a very malicious proposal.”
4 Pump Court barrister Peter Hamilton says: “I think it is wholly wrong for an investigating authority to publish what it is investigating before it has reached any conclusions and before the person or firm involved has had a complete opportunity to answer all the points.
“It is very much a case of we think you are guilty and, from the public’s point of view, the reputational damage to the affected person or firm is huge.”
Reynolds Porter Chamberlain regulatory partner Steven Francis says: “The Government will have to tread very carefully when implementing this power. The regulator 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.”
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Readers' comments (4)
Anonymous | 24 Feb 2011 11:10 am
Boys we will be paying for the FSA blunders and unfounded accusations when they are proved incorrect?
I hope their compensations fund is big sorry we IFAs will pay for this as well sounds like we are recycling our fees!
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hugh jeego | 24 Feb 2011 12:27 pm
Can we flag this latest FSA edict up as the"No Smoke without Fire" approach to investigations?
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Anonymous | 25 Feb 2011 11:26 am
Everyone needs to looks at this from the other side of the fence.....
What happens when a customer has a genuine complaint and reports it to the FSA. Because of the current way things are done there is no way for that customer to know whether the FSA are investigating that complaint until a final report is produced assuming that the FSA do indeed produce an inforcement final notice rather than cover the matter up.
Therefore the customer is totally in the dark as to whether anything is being done at all which is ludicrous. Imagine making a complaint to the police about a crime and then only finding out whether anything has been done if there is a conviction.
Unless the FSA involve complainants in their investigation process - which they dont appear to want to do (why trouble themselves with the little people!) - then the only way that a complainant would know if anything is being done is being done is if the FSA publicise it before the end of the investigation.
I agree that this proposal is a sledgehammer to crack a nut but since the FSA dont seem to want to take the obvious and preferable action (ie involve the complainant) then this proposal has to be wholeheartedly supported. The customer must be protected.
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Anonymous | 25 Feb 2011 11:47 am
Re Anon @ 11.26
"The customer must be protected."
And so must we, against an incompetent often stalinist style regulator.
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