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FSA wants power to suspend individuals during investigations

FSA Letters 480

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.

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Comments

There are 22 comments at the moment, we would love to hear your opinion too.

  1. Don’t we have a general principle of innocent until proven guilty? Extending the FSA/FCA powers in this way would appear to be a step in the wrong direction entirely. It seems as though the regulator is detemined to portray itself as a bully rather than a partner in ensuring that clients have best advice. This should not be permitted.

  2. It seems we work in an industry full of people involved in some crime one way or other???
    The worst criminals get a chance to clear their name or otherwise? What is wrong with this industry that it does not have those rights? or are being taken away??? I hope good sense prevails!

  3. Derek Bradley ceo Panacea 21st September 2012 at 5:33 pm

    I am almost lost for words.

    Safeguards do not replace responsibility. And it is the lack of the latter that troubles, in this case if they get it wrong. Grrrrrr

  4. This relates (according to the article) to senior management in banking, and therefore I think it improves the supervision of teh accountability of these individuals and can only be a good driver for change.

  5. This relates specifically to the senior management of the banking sector (in this context) and I think is a great step forward to ensuring accountability of these individuals and should be a driver for change in this sector.

  6. “FSA want power….” Safeguards will be put in place… I understand their concerns but take a small business – providers would cease trail to IFA who would not be allowed to advise / service existing clients. Then investigation proves the IFA has no case to answer!!! BUT oh dear, the IFA has gone out of business due to time taken by the investigation. Poland and blond haired, blue eyed master race come to mind. Do please take a step back and take a logical look from outside the box.

  7. Franz Kafka is alive and well, and running amok in Canary Wharf.

    The Arch cru debacle has plained illustrated that the FSA is not averse to employing its powers to draconian effect – some might say that it has abused its powers ……

    In addition, it is challenging the long established principle of ‘causation’; ie, that responsible for loss must be proven before a firm can be held responsible.

    It is now suggesting that individuals are guilty until proven guilty.

    As the proposed Arch cru Consumer Review and the FSA’s own press release demonstrate, this is a regulator that has lost any sense of perspective or accountability.

    This proposed extension of power must be refused.

  8. Anon @ 5.37 is correct.
    They will be rounding us up and interring us next. Unless they have shot us first, that is. This is very very dangerous ground.
    No other section of society is having their human rights eroded bit by bit in the way Advisers are having their rights diminished. This is setting a very dangerous and sinister precedent much like the Enabling act of 1933. http://en.wikipedia.org/wiki/Enabling_act

  9. what next, freeze all thier bank accounts? take their passports, the FSA are to blame for the sorry mess the financial services industry finds itself in, failure to monitor the biggest risk takers , the banks, instead they go after the one man bands and small companies, easy prey for the dark art of changing/invents rules after the fact, Failure to issue proper guidence failure to supervise failer to do what they where ment to do, now they want an iron fist to throw about, if they use it on the top managers they would also use it on the small one man bands( all in the interests of fairness and to be PC) OK lets say such a power is grant what about a fine for the FSA or the FCA payable to that manager or advisor when the case against them collapses, lets say 10 times the last years salary or turnover? maybe then such a power would only be used with extreme caution.

  10. Bloody hell. Why not just shoot us? As (Dennis) Whatley has promised.
    I guess it’s not too terrible for bankers who will still get their £25,000 per month while enjoying the time off and having a whole legion in the compliance department handling his case. But for us mere mortal IFAs, not only would we have the huge stress of an investigation and all that involves, we won’t even be able to earn a living and pay our bills.

    FSA, FCA – what not just call them the Geheime Finanz Staatspolizei (Financial Gestapo)

  11. David Trenner - Intelligent Pensions 21st September 2012 at 7:14 pm

    I am with Matty (both of them) on this one.

    We are not talking about minor breaches, but major scams and it makes a lot of sense to suspend a scammer whilst gathering proof.

    Innocent until proven guilty, but as a society we remand dangerous accused in jail. What is the difference?

  12. From specific experience in a small European jurisdiction with an amoral regulator in charge, the problem is regulators are indeed very human, do not always have integrity when their career is on the line because they have blundered. This sort of power on top of the power they have will help them to cover their tracks, save their careers, hide the truth and create a climate of impunity (again from experience) where all regulatory employees take their cue from the boss and lie and obfuscate rather than being upfront with the Truth of the matter. Integrity goes out of the window to protect well paid careers whilst the innocent company (and many employees) is smudged forever.

  13. @Dominic Thomas – fully agree. Unfortunately the Financial Services and Markets Act is the only piece of legislation where “the accused” are guilty until proven innocent. This already flies in the face of natural justice. A regulator that continually needs more power will abuse the processes of natural justice still further and force mass departures from the industry, as well as a queue a mile long at the Tribunals.

  14. This would be the most ridiculous extension of powers known to man. The FSA is populated by people with a severe lack of understanding of the industries they regulate, Judgements made by such people (and their bosses) tend to be biased and subject to improper influence and politics. It is common knowledge that the FSA are able to bully most individuals and firms into a ‘deal’, as those affected value their careers and reputations and seek to end proceedings quickly. Given this fundamental lack of understanding, giving the regulator further powers will only lead to greater levels of injustice, even if the idea is actually meant for good.

  15. Hello Playmates!

    Oh dear. The Canary Towers wankers want even more power. But they had all the power required to identify the banking crisis but they did nothing. Absolutely nothing. Now they want the power to deny people their living? It’s time for the FSA to finally put their collective heads between their legs and kiss their **** goodbye.

    Love and kisses (but not that kind)

    Larrykins xxx

  16. Ah, The old guilty until proven innocent ploy !

    I agree with D Trenner – except for- Would you trust them to know the difference?

  17. @ J Middleton: No, you should take a look at the Proceeds of Crime Act 2002 for what ‘guilty till proven innocent’ really looks like.

    @ anyone who wants to make ill-informed racial caricatures: I’d remind you it was the British who invented concentration camps.

  18. The FSA are proposing a form of Internment without Trial.

    If they have sufficient grounds the Regulator should be able to go via a COURT and JUDGE and request such a sanction to limit harm.

    A right of APPEAL should then be available to the proposed Sanctionee.

    The financial regulator should abide by the Laws rather than continually attempt to make themselves unaccountable to the law.

    In such cases where they seek to limit harm they should follow due process.

  19. @ Adam Smith.
    No matter who started them Adam, any right thinking person knows that they are wrong.
    The FSA/FCA deserves such caricatures, as you term them. They continue to seek more and more power with less and less accountability. There is very little difference between men of lawlessness whatever race they originate from.

  20. Hello Playmates!

    Our regulator thinks it is God!

    If they are right, all of our troubles are over.

    Love

    Larry xxxx

  21. I guess this is the first showing on the FCA’s new Shoot first and ask questions later policy announced some weeks ago by Martin Wheatley.

    Whilst none of us could reasonably argue against wrong doers being brought to book, this is an extremely alarming development. No external body exists to ensure that the FCA won’t overstep its authority, use its powers with reckless haste or excessive force and, in so doing, possibly wreck a career or business or both. Surely, there needs to be some sort of external authority to ensure such powers are used responsibly?

    At this rate, the FCA will grant itself the power to tap people’s (business) telephone lines without the irksome inconvenience of having to get official sanction from a judge.

    What kind of totalitarian monster are we being forced to fund? Pretty soon, the KGB will look tame by comparison.

  22. To Dominc Thomas

    “Innocent until proven guilty !”

    get real – “Guilty until proven innocent, but guilty anyway ”

    The regulator of our industry has been and still is a bully boy organisation, staffed by inadequately qualified people purporting to know how our industry is best served.

    Even the head LordTurner admits now to having failed in its objectives.

    This industry is in a mess and appointing people like Martin Wheatley to head the FCA is just plain madness, he is not going to challenge or change the status quo and does not appear to have the necessary understanding that any basically qualified IFA is required to have concerning how the Financial Planning Process issupposed to work.

    He says he is ditching the Sants philosophy of “be afraid” but no substantive proposition to ensure the survival of the IFA sector has been put together and very little notice of any input from IFAs was taken when putting the RDR together.

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