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MPs back early warnings without FCA telling firms

The Financial Conduct Authority would be able to publish details of firms and individuals that are the subject of ongoing enforcement investigations without having to notify them first under recommendations made to the Government.

A joint committee of MPs and lords published its report on the draft Financial Services Bill last month.

The bill sets out the new regulatory framework under the FCA and the Prudential Regulation Authority.

The draft bill gives the FCA the ability to publish warning notices against firms or individuals before the regulator has completed its investigation.

Currently, the draft text requires the FCA to consult the subject of the warning notice before issuing any publicity about the ongoing investigation. The FSA has called for this requirement to be removed, arguing that most individuals and firms would seek injunctions to stop the notices being made public.

In its report, the joint committee says: “Requiring the FCA to consult could seriously undermine the effectiveness of this new power.

“The fact that the FCA will not be publishing the warning notice itself but only the fact that it has issued one and it will need to take into account a number of considerations in deciding what to publish should provide sufficient safeguards.”

However, the committee has recommended the FCA publish guidance on how it will exercise its discretion in issuing early warning notices.

FSA figures obtained by Money Marketing reveal that nearly a third of enforcement cases in 2009/10 did not result in disciplinary action.

Thameside Wealth director Tom Kean says: “This is a sinister development. The allegations may not be proven and by publishing the warning notices, the regulator has ruined that person’s reputation.”

Joint committee report’s key recommendations

  • The FCA should not have to consult before publishing warning notices subject to ongoing enforcement action
  • The FCA’s strategic objective should be amended to focus on promoting fair, efficient and transparent financial services markets
  • The FCA should have a clearer role in promoting competition, with the power to make market investigation references to the Competition Commission and the power to hear super-complaints
  • The FCA should be given responsibility for regulating the consumer credit industry
  • The draft Financial Services Bill should place a responsibility on firms to act honestly, fairly and professionally. Firms should address conflicts of interest and provide timely, accurate and clear advice and information
  • The remit of the Prudential Regulation Authority should extend to significant global investment firms
  • An international regulatory committee should be established made up of representatives from the PRA, the FCA, the Bank of England and the Treasury to maximise the UK’s influence over European and international policymaking
  • The Financial Policy Committee, responsible for financial stability, should have a powerful supervisory board to make the FPC more accountable
  • The draft bill should be amended to give the Chancellor the power to direct the Bank of England where there is a material risk to public funds. From that point, the Chancellor must take responsibility for handling the crisis
  • A single independent complaint system should cover both the FCA and the PRA



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