Financial Conduct Authority to publish information about warning notices

The UK financial regulator, the Financial Conduct Authority (FCA), has confirmed that it will publish information about warning notices that it issues in enforcement cases.

This constitutes a significant change to its enforcement process and the stage at which the FCA may publish information in relation to its ongoing enforcement cases.

When deciding whether to publish information relating to warning notices, the FCA will start from the presumption that it will normally be appropriate to publish on its website a summary of the allegations made against a firm or an individual in an enforcement warning notice.

If the subject of the warning notice is a firm, it is also likely that the FCA will identify that firm in the information it publishes. However, if the subject of the warning notice is an individual, the FCA will only identify that individual in exceptional circumstances, for example, if it is necessary to do so in order to prevent or dispel market rumours as to the identity of the subject of the warning notice. Even if the FCA decides not to identify an individual who is the subject of a warning notice, it may still publish the identity of the firm that they are employed by, even if that firm is not the subject of an FCA enforcement investigation.

In the event that the FCA thinks that it is appropriate to publish information relating to a warning notice, the subject of the warning notice and any parties it is copied to will be notified of this. They will also be given 14 days to make representations to the FCA if they wish to oppose the FCA's decision to publish this information. It is likely that such representations will focus on whether it is fair or otherwise appropriate for the FCA to publish information about a warning notice.

If, having taken into account any representations received on the subject, the FCA still thinks that it is appropriate to publish information about a warning notice, this information will be published on its website. In the event that an enforcement case about which information has been published at the warning notice stage is subsequently discontinued, the FCA has stated that it will not remove this information from its website. Instead, the FCA will take steps to make it clear that the action has been discontinued but will not give reasons for the discontinuance.

Comment

The FCA's decision to publish information relating to warning notices constitutes a significant change to its enforcement process and the stage at which the FCA may publish information in relation to its ongoing enforcement cases.

This is different to the original proposals outlined in the March 2013 consultation paper (CP13/8) (http://www.fca.org.uk/static/fca/documents/consultation-papers/cp13-8.pdf), in particular, relating to the identification of individuals who are the subjects of warning notices. This change in approach may be beneficial to some individuals who, under the FCA's new policy, may not be identified if information relating to a warning notice is published. However, there is still a risk that senior individuals will be identified in information published relating to warning notices, in order to help avoid confusion or market rumour regarding the identity of the subject of a warning notice.

The FCA's ability to publish information about an ongoing enforcement case before the subject has an opportunity to formally challenge the FCA's findings will, in turn, also impact the strategy employed by the subject of an FCA investigation and their advisers. For example, it will be more important for the subject of an FCA investigation and their advisers to engage with the FCA as to the merits of their case at an earlier stage instead of waiting until the FCA issues a warning notice before doing so. Doing so may help to ensure that representations made to the FCA before the warning notice stage are taken into account in the information published about the warning notice.

The FCA may also use their ability to publish information about ongoing enforcement cases at the point at which a warning notice is issued as a negotiating tool, in order to encourage the subject of an FCA investigation to settle their case at an earlier stage. This is because if a firm or an individual shows willingness to settle a matter at the warning notice stage, the FCA may decide not to publish information relating to the warning notice and instead wait until the final notice can be published.

Looking more broadly, the FCA's power to publish information relating to warning notices may also lead to an increased and earlier litigation risk for firms and/or individuals who are connected to a warning notice. For example, a claimant may base its claim against a firm on the basis of allegations included in the summary of the warning notice published by the FCA. Even if the allegations made by FCA are changed or dropped at a later date, the firm may still have to expend significant sums to defend or apply for a stay of the litigation in the meantime.

Where on the web?

Read a more detailed analysis of the FCA's new approach to publishing warning notices.