Five things I learned from the FCA’s warnings policy

Michael Trudeau

Financial journalists across the country were rubbing their hands greedily today (15 October) when the Financial Conduct Authority announced it would hereby publish warning notices before enforcement action, often including the names of firms and individuals concerned.

The policy statement, which follows a consultation launched in March, is obviously ripe for ‘name and shame’ headlines, but what will the reality of the new rules mean for firms that are subject to a warning notice. Here we summarise five key take-away points:

1. Effective immediately

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It’s all in the above line really. The FCA policy is in effect right now, and the regulator can begin publishing warning notices from today.

Any bets as to who the first firm will be?

Don’t hold your breath for a deluge of warnings though, a spokesperson for the regulator told me it will most likely apply to cases that begin as of now, so it isn’t as though the FCA has a pipeline of warning notices ready to unleash on the world.

2. Individuals are less likely to be named

The FCA is a merciful and beneficent god. Well that might be going a bit far, but I imagine many will sigh in relief when they hear that the FCA will be less likely to name individuals than firms.

The regulator states in the paper: “We also expect it will normally be appropriate to identify a firm that is the subject of a warning notice, but not to identify an individual.

“We now consider that the potential harm caused to an individual from publication at this stage of the enforcement proceedings will normally exceed the benefits of early transparency, but that this will not normally be the case for firms.”

3. Warnings are forever

One detail very much worth noting for any individuals or firms thinking about taking their chances on the shadier side of regulation is that once you are named in a warning notice your name will be up on the FCA website in perpetuity.

That’s right: even if the FCA drops its investigation against you and decided not to hit you with any penalties, they will not remove the warning notice - including your name if you were named - from their site in the “interests of transparency”.

Instead, if the regulator issues a notice of discontinuance, or in other words drops a case, it will amend the warning notice and provide a link to the notice of discontinuance. The regulator will not explain why it decided to discontinue proceedings.

I wonder how prominent this will be. Will “DISCONTINUED” appear in the headline in all-caps, or will it be a paragraph in the notes at the end?

The policy statement says an amendment will likely go something like this:

“On [date] the FCA published a statement [link to that statement] that it had given [name of firm/individual] a warning notice on [date] proposing to take action in respect of the conduct summarised in that statement. Following further consideration, the FCA has decided to take no further action against [name of firm/individual] in relation to this matter.”