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Advisers brand FSA warning notice move ‘dangerous’

Advisers say the FSA’s push for regulators to have the ability to publish warning notices without first notifying the firm involved is “dangerous” and could be “extremely damaging” to a firm’s reputation.

In February, the Treasury published a consultation paper on the new regulatory framework. It announced plans to allow the Financial Conduct Authority to publicise warning notices against firms and individuals and the grounds on which action is being taken.

The draft Financial Services Bill, published in June, requires the FCA to consult the subject of the warning notice before issuing any publicity on the investigation. But in a memorandum submitted to the joint committee on the bill, the FSA argues the requirement will “seriously undermine” the effectiveness of the new power. The regulator says firms and individuals will be likely to seek court injunctions to stop the nature of the investigation becoming public, which the FSA says is not in the public interest.

The FSA says: “Our strong preference would be for the requirement to consult the subject of the notice to be removed from the bill. The effect would be to bring this provision into line with standard civil and criminal legal powers.”

Evolve Financial Planning director Jason Witcombe says: “We have always had an innocent until proven guilty rule and this latest move seems a bit scary. It could be extremely damaging if a firm is named and shamed, only for the investigation to fall through, at great cost to the firm’s reputation.”

Baronworth Investment Services director Colin Jackson says: “An investigation may take place and the regulator’s concerns may prove groundless. It is dangerous to publish warning notices before an investigation because firms can lose business as a result.”



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