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FCA warning notices branded ‘pointless’ and ‘ineffective’

The FCA’s first early warning notices have been slammed as “pointless”, as regulatory experts question whether anonymous warnings can act as effective deterrents to bad behaviour.

The regulator published its first two warning notices this week, against two bankers for Libor manipulation, which named neither the individuals nor the firms involved.

The FCA was given the power to publish early warning notices by the Financial Services Act 2012, with the aim of promoting early transparency of enforcement proceedings.

It initially proposed naming individuals and firms in most cases, but watered down the final rules in October, saying it will normally only identify firms in warning notices, and not individuals.

Regulatory consultant Richard Hobbs says: “These notices are pointless. What can you do with this information? Nothing.

“This will not scare anyone – what scares people is naming names.”

Norton Rose Fulbright consultant Katie Stephen says it remains to be seen whether warning notices will achieve their aims.

She says: “The FCA’s objective for warning notices is to promote early transparency of enforcement proceedings, and to allow the industry and consumers to better understand the types of behavior it considers unacceptable, thereby strengthening its strategy of credible deterrence.

“But it remains to be seen whether publication of this sort of ‘charge sheet’ constitutes a deterrent.”

Stephen says the warning notices are also unlikely to improve understanding of FCA rules, as they do not include the full facts of the case.

Fishburns partner Harriet Quiney says: “The difficulty the regulator faces is if these are small banks, naming the firm may make it easy to identify the individual. These are unlikely to be effective as a deterrent in the long term.”

A spokesman for the FCA says: “Where the subject of a warning notice is an individual we will usually not identify them, and we will take care so that an individual cannot be easily identified from our notice. Mentioning the firm an individual works or worked for makes identification much easier.

“Where the subject of a warning notice is a firm, however, we will identify the firm in most cases.”

Pilot Financial Planning chartered financial planner Ian Thomas says: “The regulator is trying to walk a tightrope between its duty to protect consumers and treating individuals and firms fairly.

“But it is difficult to see how a notice which names neither an individual nor a firm could act as a warning to anyone.”

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