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FCA to issue record number of private warnings

The FCA is set to issue a record number of private warnings this year, as lawyers question the appropriateness of the supervisory tool.

The Financial Times reports the FCA has written 62 private warnings to individuals and companies so far in 2014.

This is close to the 64 warnings issued in the whole of 2012, the highest ever, according to a Freedom of Information request submitted by the FT. In previous years, the figure was around 20.

Lawyers are warning the increase could amount to “enforcement by the back door”, and the tool is being used to make serious findings agaisnt individuals and firms. 

Stephenson Harwood partner Sara George says: “Originally, private warnings were used when the infractions were not serious. Now the FCA is using them to make findings that someone is not fit and proper. I question whether that’s appropriate.”

Private warnings are non-statutory instruments, meaning they have no legal force. They can be challenged but only through a judicial review.

The censures stay on individuals’ or firms’ records, and must be disclosed to a new employer.

Baker & McKenzie partner Steven Francis says: “So many people are happy just to get a private letter – rather than a fine, say – that they don’t focus on the content, which can contain very serious findings and where there is no real redress mechanism.”

Regulatory experts report increased use of the warnings to conclude the FCA’s investigation into the alleged rigging of Libor.

The FCA refused to reveal how many of its private warnings related to benchmark investigations, citing data protection laws.

The FCA says: “Where an individual applies for authorisation the FCA must be satisfied they are fit and proper. A private warning is one factor we will take into account in that, as is any other evidence from previous supervisory interactions.”



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