The Financial Conduct Authority has secretly reprimanded 39 senior executives of financial companies over the past six years.
According to FCA guidelines, the regulator can decide not to bring formal action or publicly censure an individual, despite concerns about behaviour or evidence of a rule breach.
The FCA might therefore issue a ‘private warning’ where it explains its concerns to the individual and make them aware that they came close to formal action.
A Freedom of Information request, submitted by FTAdviser’s parent publication the Financial Times, revealed how many executives of financial firms the regulator has secretly censured between 2011 and 2016.
The data, seen by FTAdviser, showed that of the 39 senior managers the UK financial watchdog has rebuked over this period, 14 are chief executives.
The FOI figures also indicated that 14 of the executives still have authorised roles.
It’s not good enough to keep secret the wrongdoers at senior level Alan SteelIn 2012, the number of private warnings issued by the FCA reached a peak, when 21 top executives were cautioned out of 64 individual warnings.
The regulator is currently reviewing its policy in relation to the use of private warnings as it looks to be more transparent.
In its Mission document, the FCA stated: “A private warning does not provide a determination that a breach has occurred and may give the impression that fair process has not been followed.
“Equally, many firms may appreciate that ‘private warnings’ offer a quick and clear resolution to concerns which can be achieved more quickly than a full investigation.”
The regulator also said its judgements should provide a “line in the sand”, while helping to educate the market about its expectations of firms.
Private warnings will form part of the person's compliance history and might therefore influence the FCA's decision whether to take action for future breaches.
Alan Steel, director of Alan Steel Asset Management, criticised the regulator's use of private cautions.
"I think given the increasing fees we have to keep paying the FCA, increasing partly thanks to the industry’s failings over the years, that it’s not good enough for the regulator to keep secret the wrongdoers at senior level, far less to leave some in their jobs.
"What message does that pass to would-be miscreants ?" he questioned, suggesting those bosses who do not behave appropriately should be named and shamed.
However, Tony Catt, compliance officer at TC Compliance, defended the use of private warnings, saying it depends on whether the issue is one of public importance or whether it is a technical internal issue.
He said not all of the FCA's dealings need to be made public, particularly if individuals are part of a larger investigation that might be jeopardised by public knowledge.
katherine.denham@ft.com
