Complaints Commissioner warns over FCA early warning powers
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Complaints Commissioner Sir Anthony Holland has raised significant concerns about proposed new regulatory powers which would allow publication of ongoing enforcement actions.
Holland warned MPs scrutinising the draft financial services bill last week that government plans to allow the Financial Conduct Authority (FCA) to publicise warning notices against firms and individuals and the grounds on which action is being taken could see innocent firms and individuals treated as if they are guilty.
Currently, the FSA only publishes action once its investigation is complete. It is pushing for stronger wording of the draft bill to publish warning notices without notifying those affected.
Out of the 114 enforcement cases concluded by the FSA in 2009-10, nearly a third were dropped after the warning notice stage.
Holland told MPs: “It is a regulatory matter which determines people’s livelihoods. Everyone has to accept that, in the interests of consumer protection, publishing before having reached finality in what happened runs the risk that first, there may be no guilt and second, that people’s jobs and security may be affected. It is a very fine line to draw.”
Russell Collins, the chairman of the Financial Services Practitioner Panel, says: “In quite a number of cases, firms would have suffered reputational damage but then would be found to have been acting correctly. What I would suggest is not to publish the name of the firm, for the new regulator to find a way it can make public its concerns without damaging the reputation of the individual firm.”
Collins cited the example of Gartmore and its fund manager Guillaume Rambourg. The FSA launched an investigation into Rambourg after he was suspended for alleged breaches of internal trading rules but dropped its investigation after finding no evidence of wrongdoing. The saga prompted huge outflows from Gartmore, triggering the company’s sale to Henderson in January.
But Adam Phillips, the chairman of the Financial Services Consumer Panel, supported the new powers, arguing the period between a warning notice being issued and a final notice ban can be between nine and 18 months, during which time no one knows a company is being investigated.
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