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FSA: When it would be unfair to publish early warning notices

FSA Front 480

The FSA has today published a consultation paper on the Financial Conduct Authority’s publicity policy around early warning notices.

The move to publish warning notices at an earlier stage marks a radical departure from the previous system where individuals or firms would be able to respond to allegations against them at the independent Regulatory Decisions Committee before information about the ongoing enforcement case against them is made public.

Here are some scenarios from the FSA paper on when the FCA will and will not publish early warning notices:

  • Issuing a warning notice to a senior manager of a bank for failing to exercise due skill, care and diligence in managing the firm’s business

The individual suffers from a long-term physical illness and states he will significantly deteriorate if details of the warning notice are published. He has a report from a consultant to support his claim. He also states his wife is suffering from depression and her condition may deteriorate if the warning notice is published. He adds his children have already been made fun of at school following earlier press commentary about his conduct, and this is likely to be repeated if the warning notice is made public.

FCA likely to publish? No, not if the senior manager had clear and convincing evidence his health would seriously deteriorate, or if there was clear and convincing evidence other family members would be affected. The FCA would be likely to publish a warning notice if the only argument was media intrusion.

  • Issuing a warning notice to a small IFA over inadequate systems and controls over its sales processes for high risk investment products:

The firm argues if a warning notice is published many existing customers will go elsewhere and the company could have difficulty attracting new business. This would lead to staff redundancies. The IFA is also able to produce evidence to show a reduction in business will reach the point where the firm becomes insolvent.

FCA likely to publish? No, not if there is clear and convincing evidence of likely insolvency. The FCA would also probably not publish if it would lead to staff being made redundant but the firm would need to prove that negative publicity rather than any other factors would be the reason for job losses.

  • Issuing a warning notice to a manager for failing to observe proper standards of market conduct in carrying out her role:

Her firm has supported her through the investigation but the individual argues she is likely to lose her job if the warning notice is published. She also argues even if the case against her is later dropped, her career prospects will be irrevocably damaged.

FCA likely to publish? Yes, as the firm has also decided to support the employee through the investigation. If the case against an individual is later dismissed, the FCA will publish a notice of discontinuation on its website.

Where it publishes early warning notices, the FCA plans to include a disclaimer that the warning notice is not the final decision, and that the firm or individual can still take their case to the RDC and the Upper Tribunal.

Click here and here for one example of what warning notice statements could look like.

The consultation closes on 18 June.


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Interesting observation.

    Note how 2 of the 3 scenarios are aimed at individual sanction. The shape of things to come?

    Let’s hope so. More personal and individual accountability and punishment is needed in the new world order.

  2. Whatever happened to the rule of law?
    Innocent until proven guilty or guilty because the FCA, who may not be as experienced or as well qualified as you, said so. Which would you prefer?
    Abu Quatada has more human rights than an adviser.
    “Absolute power tends to corrupt the minds of those who pssess it”
    In a case we heard of yesterday the fsa told an advisers lawyer to leave the room. Even the police cannot do that and must also build a persuasive argument in order for it to appear in court, where one is tried by a jury, not just the judge or the accuser and where the accused may put their case.
    If you are not worried about the seriousness of the FCAs powers you should be.They are a law unto themselves.
    Vote UKIP

  3. If I thought that by voting for UKIP, or any other party for that matter, I wouldn’t just be replacing one set of imbeciles with another, I would. As for the regulators:The PIA, FSA, and the FCA. I really can’t see any change there, UKIP or otherwise.

  4. @ Anon 1.40. I am right there with you. What is wrong with waiting for the guilty verdict to appear. Then hell slap it up any IFA who screwed client(s). Until that time they should keep their fat mouths shut. Look at their previous history with getting things wrong on a huge scale. What chance have they got of getting right first time every time? Nil is the answer. Sure what does it matter if they put an IFA out of business when he or she did nothing wrong? They are scum and dont care about anything except the greasy pole they are individually climbing.

  5. Hampshire Yokel 19th March 2013 at 3:24 pm

    I find myself slightly torn on this matter.

    My immediate response was sort of in line with others, in that the publication should wait until such time as the firm or indivdual has been adjudged ‘guilty’, with this having been agreed by the RDC.

    However, the comments by Anon @ 1:40 p.m. – “Whatever happened to the rule of law?
    Innocent until proven guilty” have caused me to rethink.

    In a court of law, the names (unless protected by law) would be published quite early. You only have to look at the number of people that have been arrested for sex crimes and had their names flagged in the press (before charges have been made or court action commenced), to see that publication doesn’t wait until a Guilty verdict has been passed.

    Whilst I’d like to think that sexual crimes, especially those against children, should be treated more harshly, there have also been high profile cases where names have been shared in early stages of cases for theft and for motoring crimes.

    I’d still prefer publication to wait for the passing of judgement by the RDC, but I think the arguments expressed here do not help.

  6. @Hampshire yokel
    If you were falsely accused of rape, how soon would you like your friends and neighbours to know about it.

  7. Hampshire Yokel 19th March 2013 at 4:49 pm

    Anon @ 3:40 p.m.

    Of course, if I were falsely accused of rape (or any other crime), I would be very upset at it becoming public knowledge. However, I was trying to highlight that ‘accussitory’ information already gets into the public domain on a regular basis. We’ve heard of DLT’s numerous arrests for alleged crimes and those of other famous individuals as well. These are all cases where people are being questioned about alleged offences, long before any decision has been made as to whether a proscecution is in the interests of the public.

    I would prefer that all names are kept secret, for all offences, until such time as a guilty verdict has been passed. That way, the names of the innocent are protected from the ‘no smoke without fire’ attitudes that may impact upon people who have been found innocent.

    So, rather than bring forward the publication of names in respect of financial services cases I would like to see a delay in respect of all crimes.

    But now I’ve prattled on too long, being repetitive and probably rather too boring (even for me).

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