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New stats raise fresh concerns over FCA’s early warning powers


New figures showing the financial regulator dropped one in four investigations after the point at which early notices could have been made public have raised fresh concerns about the FCA’s new powers.

From April the FCA has had the power to publish early warning notices before the more formal decision notice stage and before firms and individuals have had a chance to respond to the contents of the warning. It has yet to use the power.

According to new statistics from the Regulatory Decisions Committee, there were 316 regulatory investigations in 2012/13 with 124 reaching the warning notice stage. Thirty one cases were subsequently dropped, with no action taken. 

SJ Berwin partner Tim Dolan says: “It means an awful lot of care has to be taken because so many cases are dropped and there is no come back from the reputational damage for these firms.”

4 Pump Court barrister Peter Hamilton says the FCA is using the prospect of reputational damage to make firms “fear” regulatory investigations. He says: “This is not due process. These notices are yet another piece in the armoury of an overweening regulator which needs to be held back all the time.”

Lansons director of regulatory consulting Richard Hobbs says: “The FCA is on troubled ground because if the subject of an early warning notice gets off they will look to see whether the regulator has acted lawfully. The FCA will need to tread carefully but I think it will.”

Apfa senior technical adviser Linda Smith says: “That so many cases are dropped does not fill us with confidence. You would have hoped they would have collected enough information by the warning notice stage to make a well judged decision about what the outcome will be.”

The publication stage of possible regulatory action was brought forward in 2010, from when an enforcement case was concluded to the decision notice stage. Out of 316 regulatory investigations in 2012/13, 78 reached decision stage.

The FCA refused to comment but will be publishing its position on early warning notices in a policy document, expected in September. Earlier this month, the FCA said it is “currently considering whether to amend” its approach to publishing early warning notices due to industry feedback expressing concern about reputational damage. 

Atkinson Bolton director Simon Gibson says: “It sounds like a case of guilty until proven innocent to me.”

RDC stats on the results of regulatory investigations 

RDC statistics of activity levels
Period 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013
Total cases in progress over the period 315 267 284 382 316
Warning notices 140 155 135 118 124
Decision notices 123 127 136 102 78
Cases withdrawn by the executive 18 24 33 27 31


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