OpinionMay 30 2013

Proposal to publish details of warning notices

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In March, during its final days, the FSA published consultation paper 13/8 on enforcement warning notices. The paper’s proposals represented a hardening approach to the enforcement process as far as firms and individuals are concerned and its effect will be everyone who is served with a warning notice.

Before any allegations are proved or even challenged, details will be published and in effect reported in the trade press and internet search engines for worldwide consumption. It amounts to a public relations nightmare for the recipients and represents a departure for the former regulator which previously obliged recipients of warning notices not to disclose the content to third parties other than their professional advisers.

Until 2010 the earliest that the regulator could publish details of a statutory notice in a disciplinary matter was when it issued a final notice at the conclusion of a case, either after the upper tribunal had reached a decision or after the period for referring the matter to the upper tribunal has expired. In 2010 the publication stage was brought forward to when the FSA’s regulatory decisions committee issues a Decision Notice – that is after the firm or individual has made representations to the committee in response to the warning notice but before the upper tribunal had made a decision.

The FCA now proposes to publish at the earlier warning notice stage, albeit on a more restricted basis. Unlike final and decision notices which can be published in their entirety, the FCA cannot publish whole warning notices.

The principal purpose of the power is to promote early transparency of enforcement proceedings. Its introduction marks what is termed a bold move towards more transparent and open regulation. Both the financial services industry and consumers will be able to understand the types of behaviour that the FCA considers unacceptable at an earlier stage which, in turn, will strengthen the regulator’s continuing enforcement strategy of credible deterrence.

The power only applies to the warning notices where the FCA has proposed to censure, fine or suspend a firm or individual and not to proposals to prohibit an individual, withdraw the approval of an individual or cancel the permission of a firm.

In essence the FCA will be able to make public that it has begun formal disciplinary proceedings against a firm or individual. However, for what it is worth, the FCA is obliged to consult those to who the warning notice is given or copied before publishing any information. The FCA should not publish information that it considered would be unfair to the subject.