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FCA tones down early warning notice powers after adviser concern

The FCA has watered down its powers to publish early warning notices against firms and individuals subject to ongoing enforcement action after listening to industry concerns.

In a consultation published in March 2013, the regulator proposed the powers would apply to firms and individuals, and that warning notices would not be published where it is unfair to the person involved – but only if the individual could prove publication could materially affect their health, result in a disproportionate loss of income, or prejudice criminal proceedings against them. If a case is later dismissed, the FCA said it would publish a notice of discontinuation on its website.

In its final policy statement published today, the FCA says it will normally only identify firms in warning notices, but not individuals.

The regulator will also consider publishing anonymised warning notices where appropriate, and is lowering the threshold that a person has to meet to demonstrate that publication of a notice would be unfair.

The FCA says while consumer groups were generally supportive of the proposals, industry respondents to the consultation raised a number of concerns. In particular, they argued in favour of anonymised statements, had concerns about identifying individuals, believed the threshold for determining unfairness was too high, and thought that the publication of a notice of discontinuance would not be an adequate remedy for any harm caused by publishing the warning notice statement.

The regulator says after taking into account consultation feedback, it now considers the potential harm caused to an individual from publication at an early stage of enforcement proceedings will normally exceed the benefits of early transparency.

The FCA says: “However, we consider that there will be circumstances where it is appropriate to identify an individual.”

It adds: “We believe our final policy will promote early transparency of enforcement proceedings and will enable firms and consumers to understand our concerns at an earlier stage, but should reduce the risk that any harm caused to the subject of the warning notice from publication will exceed the benefits of early transparency.”

In August, Money Marketing reported that the FCA was considering revisiting the way it publishes early warning notices about firms or individuals who are subject to an ongoing enforcement investigation due to concerns about reputational damage to those later proved to be innocent.

Advisers in particular raised concerns that early warning notices could cause irreparable damage to a firm’s reputation. 



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. I do hope they will put up the names, scheme details and administration company details of those thought to be perpetrating pensions liberation or simple theft of amounts transferred to the “schemes”.

  2. My very great friend in Rome 23rd October 2013 at 9:18 am

    If a firm is exonerated from all and any accusations of wrongdoing, how can there have been any benefit to anyone from what the FCA euphemistically terms “the benefits of early transparency”? There can only have been detriment, both to the firm’s reputation and to the confidence of its clients in its integrity. Publishing prematurely on its website an unproven notice of investigation can cause irreparable damage to a firm for which the regulator never pays any sort of compensation or publishes a retraction.

    A couple of years ago (it was reported in these very pages), the FSA even published a completely erroneous notice of sanctions having been imposed. It took the firm in question so long to get the FSA to admit its error and to remove the notice that, by the time it finally did so, the firm in question had suffered so many client defections that its reputation and revenue stream had all but been destroyed beyond recovery. Yet the FSA refused even to publish an apology. It merely shrugged its shoulders and more or less just said: Oh well.

    But, for all that, this announcement may represent a forward step.

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