View more on these topics

Legal fears on early warning

Financial services lawyers and Aifa have raised strong concerns over Government proposals to allow the new financial regulator to publicise ongoing enforcement investigations.

In a consultation paper published last week, the Government revealed plans to legislate to grant the Financial Conduct Authority, previously the Consumer Protection and Markets Authority, the power to publicise warning notices against firms and individuals.

The FCA will also have the power to disclose on what grounds the enforcement action is being taken.

The Treasury argues that this will mean greater transparency as consumers would be told about potential issues at an earlier stage.

Currently, a decision notice is issued to firms or individual who are given 28 days to refer it to the Upper Tribunal on appeal. Only once the appeal process has been completed can details about the enforcement action be published.

Aifa policy director Andrew Strange says: “We are concerned about some of the proposed new powers, particularly publishing the names of firms under preliminary investigation. This is a worrying shift towards guilty until proven innocent.”

CMS Cameron McKenna partner Simon Morris points out that, in many cases, warning notices do not lead to enforcement action being taken.

He says: “It is immensely damaging for a notice to be put out without necessarily any substance to it. What the regulator would be doing is shouting allegations through a megaphone, very often before they have been put to the firm and before the evidence has been obtained.

“It is highly dangerous, highly damaging and highly unsatisfactory. I think it is a very malicious proposal.”

4 Pump Court barrister Peter Hamilton says: “I think it is wholly wrong for an investigating authority to publish what it is investigating before it has reached any conclusions and before the person or firm involved has had a complete opportunity to answer all the points.

“It is very much a case of we think you are guilty and, from the public’s point of view, the reputational damage to the affected person or firm is huge.”

Reynolds Porter Chamberlain regulatory partner Steven Francis says: “The Government will have to tread very carefully when implementing this power. The regulator must respect the principle of innocent until proved guilty. The mere fact of an investigation simply should not be publicised until there has been an evidence-based determination.”

Recommended

Halifax SVR blunder could cost £500m

Lloyds Banking Group has struck a deal with the FSA to undertake a review of past Halifax mortgage contracts which could cost it up to £500m. The confusion relates to mortgages taken out between September 2004 and September 2007 when Halifax was offering loans with an SVR rate cap at 2 per cent above the […]

Make your business personal

Mike Kellard, CEO for Axa Wealth, considers how IFAs can build sustainable business for the long term by focusing on the services that clients really want

1

Aviva and MetLife fixed-term annuities to have equity exposure

Aviva and MetLife are both launching fixed-term annuity products that allow investors to take limited equity risk. Aviva head of retirement Darren Dicks says the firm’s product, due to launch in the second quarter of the year, will offer savers a limited choice of low-risk investments. He says: “There will be some investment choice for […]

1

Lloyds Banking Group returns to profit

Lloyds Banking Group has made a return to profit for 2010, posting a £2.2bn pre-tax profit on a combined businesses basis. This is up from the £6.3bn loss for 2009. Statutory pre-tax profit was £281m compared to £1.04bn in 2009, although the 2009 figure was distorted by an £11.2bn accounting gain from the acquisition of […]

Trusts: Easier than you think?

Protection providers often extol the benefits of placing plans in trust. The advantages for clients are widely recognised and numerous – inheritance tax mitigation, avoiding probate delay, controlling claim proceeds, and so the long, familiar list continues. Yet, dismissed as unnecessary form-filling, or simply viewed as irrelevant in the context of a mortgage sale, less […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Errrmmm …???

    Extract from Lord Turner’s letter to Andrew Tyrie at the Treasury Select Committee dated 15 December 2010:

    The legal position on publication of reports or documents generated in the course of such investigations is clear. In those cases where a decision is made not to progress with an enforcement action, we are not permitted to release them without the consent of all involved. Until now RBS has made it plain that it does not wish to provide consent. This regime – set out in FSMA and in relevant Single Market Directives – is designed both to ensure maximum flow of information, and to protect the legal rights of people under investigation.

    We therefore recommend that Government and Parliament should consider the case for introducing into the forthcoming legislation, provisions which would enable the PRA to conduct and publish full analysis of the causes of any bank failure or rescue, drawing openly on supervisory investigation material which would normally be subject to confidentiality constraints. Confidentiality constraints would continue, however, to apply in the case of investigations into executives or firms which have not failed or been resolved.

    We would need permission from RBS (and we expect from a number of third parties in addition) to do this notwithstanding the wording within the Act which you quote in your letter drawn from Section 348 (4) (b) of FSMA. This section of the act allows the FSA to make public information but only where we do it in such way that a person can not be identified, but with the legal meaning of ‘persons’ covering firms as well as individuals. It would not therefore allow us to put out a report on RBS, as RBS would, of course, be identified. This provision therefore can only used by us when making general statements from which it is not possible for particular firms or individuals to be identified; for example, as part of an industry wide review we may say several firms need to improve their controls.

    From here:

    http://www.fsa.gov.uk/pubs/other/tyrie_15dec10.pdf

  2. “highly dangerous, highly damaging and highly unsatisfactory……….a very malicious proposal.”

    More of the same old same old then, no doubt fully supported by Mark Hoban, despite the fact that he’ll almost certainly claim that the FCA will be as independent of government as he claims the FSA to be.

Leave a comment

Close

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

Email: customerservices@moneymarketing.com