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The UK Financial Conduct Authority announced today that, effective immediately, it may publicize information regarding warning notices issued to potential subjects of FCA disciplinary actions, prior to an enforcement action actually being taken. Disciplinary warning notices – somewhat akin to so-called "Wells Notices" in the US -- are issued by the FCA when it proposes to take action against a respondent resulting in a censure, fine, suspension or restriction.
Previously, FCA published information regarding enforcement actions only after it had decided to take an enforcement action.
If subsequent to publishing a warning notice statement, FCA determines not to take disciplinary action against the firm or individual, the regulatory agency will not remove the information on its website regarding such warning notice, but solely indicate that the subject of the warning notice has been discontinued.
Warning notice statements typically will include a brief summary of the facts that gave rise to the warning notice. Where the FCA considers it appropriate, it will also include the name of the relevant firm or individual, and in the case of an approved person (e.g., a person registered with FCA), his or her employer at the relevant time. Information about warning notices typically will not include the nature and level of the proposed disciplinary sanctions. FCA may also publish warning notice statements without naming any firm or person specifically (what it terms "anonymised warning notice statements").
According to Terry McDermott, the FCA's Director of Enforcement, "…we now have in place a regime that enables us to provide information to consumers, investors and firms earlier about the action we are taking to tackle misconduct to ensure markets work well and consumers get a fair deal."
Under the FCA's new scheme, the regulator will first consult with persons who have received warning notices of a proposed action to assess whether publication of a notice would be unfair, prejudicial to the interests of consumers, or detrimental to the stability of the UK financial system. However, the Enforcement Guide makes clear that FCA "…expects normally to consider it appropriate to publish these details."
FCA will consider the circumstances of each case, but expects normally in its publications to identify the relevant firm by name, but not the individual. However the FCA says "there may be circumstances where the FCA considers identification of an individual by name is appropriate."
If an individual seeks to contest the potential publication of information regarding his or her warning notice, he or she "…must provide clear and convincing evidence of how the unfairness may arise and how he [or she] could suffer a disproportionate level of damage."
Warning notice statements will make it clear that the warning notice is not the final decision of FCA; the recipient has the right to make representations to the appropriate FCA committee (i.e., Regulatory Decisions Committee) which will decide on the final decision; and that all final decisions may be appealed.
Where a warning notice statement has been issued, but the FCA decides subsequently to take no action against a firm or individual, the FCA will not withdraw the original statement from its website. Instead it will publish a notice of discontinuance. Warning notice statements typically will remain on the FCA's website for at least six years.
For more information, see:
http://www.fca.org.uk/news/fca-confirms-how-it-will-use-new-power-to-publicise-warning-notices
http://www.fca.org.uk/static/documents/policy-statements/ps13-9.pdf
The information contained in this article is not legal advice. For legal advice, please consult with your attorney. The information in this article is derived from sources believed to be reliable as of October 15, 2013, but no representation or warranty is made regarding the accuracy of any statement. To ensure compliance with requirements imposed by U.S. Treasury Regulations, Gary DeWaal and Associates LLC informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Gary DeWaal and Associates may represent one or more entities mentioned in this article.
Gary DeWaal is currently Special Counsel with Katten Muchin Rosenman LLP in its New York office.
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September 17, 2014
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Gary DeWaal
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UK Financial Watchdog May Now Publicize Proposed Enforcement Actions -- Naming Names -- Prior to Enforcement Actions Being Filed
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