The FSA is recommending its successor, the Financial Conduct Authority, is given the power to suspend approved persons while they are under investigation for enforcement action.
In its submission to the Parliamentary Commission on Banking Standards, published today, the regulator says it wants the FCA’s powers to go beyond the controversial early warning notices that will name individuals before enforcement action is taken, as proposed in the Financial Services Bill.
In its submission, the FSA states: “We believe that a regulatory power to prohibit an individual on an interim basis from performing controlled functions would enable the FCA or the PRA temporarily to remove incumbent senior managers where they continue to pose a risk to the regulators’ objectives whilst the action against them is ongoing.
“We accept that this power would be a significant extension to our current powers and that appropriate safeguards would need to be considered. However, this power would be a significant tool which would allow the regulators to act swiftly to counter any threat to their objectives by an approved person remaining in position pending an appeal.”
The FSA suggests safeguards could include an appropriate threshold for the exercise of the power, the right for the individual to make representations to the regulator concerned, an immediate right to refer the matter to the Tribunal and the power for the Tribunal to suspend the effect of the decision pending its decision.
The FSA’s proposals follow last week’s comments by FSA managing director Martin Wheatley that the FCA will adopt a “shoot first and ask questions later” approach to regulation.
In its submission, the FSA also calls for the power to take enforcement action against individuals who commit misconduct but fall outside its approved persons regime.
In addition, it wants the threshold for taking action against individuals to be lowered. Currently, it can only take action against a director if they were “knowingly concerned about a contravention of the listing rules”.
It states: “Our experience suggests that the current definition of ‘knowingly concerned’ is too narrow and positively disincentivises directors from making enquiries to discover whether the listing rules are being complied with.
“We therefore suggest that the definition be amended so that enforcement action can be taken where a director ‘knew, or should have known’ of the contravention.”
The FSA is also calling for the commission to consider action to tackle senior level remuneration at banks and the introduction of an ethical banking code of conduct.