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Govt pledges ‘independent’ process for early warning notices

Lord Sassoon
Lord Sassoon, House of Lords

The Government has amended the Financial Services Bill to create more “independence” in the decision making process for early warning notices.

Speaking in the House of Lords debate yesterday, commercial secretary Lord James Sassoon said he expects the regulatory decisions committee to decide on whether to impose a warning notice and whether to publish it.

Tory peers Lord Howard Flight, Lord Deben and Lord Hodgson had previously raised concerns about the fairness of the process in imposing early warning notices.

Sassoon said he recognised that the FCA had the ability to act as “judge, jury and executioner” when imposing early warning notices so has created a more robust process.

He said: “The amendment is intended to deliver a degree of independence in the decision making process and mirrors the decision to issue a warning notice or decision notice. I hope that this addresses some concerns expressed.

“Where possible the same procedure should be used to decide on the issuance and disclosure of a warning notice. It would mean, for example, for the FCA the Government expects the RDC to take both these decisions.”

Flight welcomed the amendment for creating a “fair process” at the FCA but said the Government had done it in a “tortuous” way.

The FCA is not legally obliged to keep the RDC and there have been concerns that it could be scrapped. Sassoon tried to alleviate these concerns by strongly backing the RDC although fell short of giving it statutory backing.

Labour peer Baroness Diane Hayter said: “The Government is still failing to ensure the continuance of the RDC through statutory backing.

“We hear the minister that the current FSA supports the RDC but that does not apply to the future. I hope the Government doesn’t rue the day in failed to ensure the RDC’s existence and independence.”

The Government confirmed that the Treasury will retain a “backstop” to remove the early warning notice power from the regulator if it is in the public interest.


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