View more on these topics

FSA gets backing from Parliament over tougher early warning powers

The Financial Conduct Authority will be able to publicise the details of firms and individuals that are the subject of ongoing enforcement investigations without having to notify them first, under recommendations made to the Government today.

A joint committee made up members of the House of Lords and the House of Commons has today published its report on the draft financial services bill. The bill sets out the legislation for the new regulatory framework under the FCA and the Prudential Regulation Authority.

The draft financial services bill sets out new powers for the FCA, including the ability to publish early warning notices against firms or individuals which notify the public of proposed disciplinary action, but are issued before the regulator has completed its investigation.

Currently the draft text requires the FCA to consult the subject of the warning notice before issuing any publicity about the ongoing investigation. Money Marketing reported in September that the FSA was pushing for this requirement to be removed.

The FSA argued as most indiviudals and firms would contest the warning notices, it would lead to injunctions being sought through the courts to stop the regulator making the investigation public.

In evidence to the joint committee Consumer Focus noted that regulators of other sectors such as the Advertising Standards Authority and energy regulator Ofgem already announce where a complaint has been made or where firms are being investigated.

The Government argues the FCA will consider whether or not to publish on a case-by-case basis, rather than being required to publish.

In its report today, the joint committee agrees with the FSA that the new regulator should not be required to consult before publishing early warning notices.

The committee says: “Given the powers of regulators in other sectors, and indeed, the process in criminal and civil proceedings, we see no reason why financial services firms should be granted greater dispensation from public disclosure.

“Requiring the FCA to consult could seriously undermine the effectiveness of this new power. The fact that the FCA will not be publishing the warning notice itself, but only the fact that it has issued one, and the fact that it will need to take into account a number of considerations in deciding what to publish should provide sufficient safeguards.

“We recommend that the requirement to consult before disclosing the fact that a warning notice has been issued should be removed from the draft bill.”

However the committee has recommended the FCA publish guidance on how will it exercise its discretion in issuing early warning notices.

Financial services lawyers have already warned that early warning powers are dangerous as warning notices do not necessarily lead to enforcement action. Aifa believes the power marks a “worrying shift towards guilty until proven innocent”.

Aifa director general Stephen Gay says: “While we can understand the desire to publish warning notices, we still have serious concerns about the potential reputational damage that this can cause, particularly for smaller firms.”

FSA figures obtained by Money Marketing reveal nearly a third of enforcement cases in 2009/10 did not result in disciplinary action.


News and expert analysis straight to your inbox

Sign up


There are 3 comments at the moment, we would love to hear your opinion too.

  1. As AIFA mentionerd – what happens if the FCA has investigated someone/a firm and they declare them inncoent?

    Sorry we hanged you in front of the gerneral public…

    All I can see is that the FCA will have to be very careful, as should they get it wrong, even once, no doubt the injured party could claim costs and damages from them.

  2. Yes, but for as long as the FSA/FCA retains its statutory immunity from prosecution, any party injured by the publication of an investigation that turns out ultimately to have been unfounded will have no rights of recourse to legal action for damages.

    So the deck will continue to be rigged with the FSA holding all the cards and the IFA community will be powerless to do anything about it.

    And to think that the UK is supposed to be a democracy. Clearly, as far as regulation is concerned, it isn’t. Rather, it’s an unaccountable and omnipotent dictatorship.

  3. Paul Howard

    The regulator is immune from prosecution, you can only claim for malfeasance or a breach of Article 6.

    There are plenty of cases where public notification would have saved the public from severe losses and of course in turn this would have reduced the FSCS levy. It is a bit like you finding out that someone is pillaging your bank account but the bank does nothing until it has prosecuted the fraudster.

    Yes the regulator needs to be careful, that goes without saying.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm