15 October 2015 - Post by:Sarah Hitchins
Two years ago today the FCA obtained the power to publish information about warning notices it issues in enforcement cases. But two years and 18 warning notice statements later, I find myself asking whether the FCA’s power to publish information about warning notices has lived up to its initial hype?
The initial hype
The FCA’s proposal to publish information about warning notices was controversial to say the least. Strong objections to the proposal were voiced by the industry as well as practitioners. There were fears that the FCA would use its new power to ‘name and shame’ firms and individuals that were subject to enforcement investigations before they had a chance to formally respond to the case against them.
Nonetheless, the FCA pushed ahead with its new power. It hailed this new power as a means of being more transparent about its expectations of financial institutions and those who work for them.
For our summary of the FCA’s powers relating to the publication of warning notices, please click here.
In the space of two years, the FCA has published information about 18 warning notices it has issued:
- All but one of these warning notice statements concerned individuals.
- None of the subjects of the warning notices were named in the warning notice statements (despite the FCA having the discretion to do so).
- Half of the warning notice statements published by the FCA concern individuals being investigated in relation to alleged LIBOR-related misconduct.
None of the 18 warning notice statements published by the FCA (available here) have attracted significant publicity. This is unsurprising given how high-level and unspecific warning notice statements are required to be. As a result, it is not clear how the FCA’s use of its power to publish information about warning notices has helped to ‘promote early transparency of enforcement proceedings’ and enable the industry to better ‘understand the types of behaviour that [the FCA] consider unacceptable at an earlier stage’ (as the FCA said it would). This is not to say that the FCA should be more specific and provide more information about alleged misconduct or rule breaches in its warning notice statements. To take such an approach would be disproportionate and unfair to the subjects of enforcement investigations.
But should we look at the ‘success’ of warning notice statements in a different way?
In order to properly assess how ‘successful’ the FCA’s power to publish warning notice statements has been, perhaps it is necessary to look at its impact from a different perspective? There is no denying that, in the vast majority of enforcement investigations, firms and individuals being investigated want to keep that fact strictly confidential and carefully control any publicity around findings that the FCA may make about them.
As a result and as we expected, the FCA’s power to publish information about warning notices has proved to be an effective negotiating tool for the FCA. For example, it helps the FCA to encourage subjects of enforcement investigations to settle their cases at an early stage, before a warning notice is issued. On the whole, firms and individuals would much rather have a negotiated and agreed Final Notice published in relation to them as opposed to a warning notice statement, especially if there is a chance that the FCA may identify them by name in the warning notice statement.