CP 13/8: Publishing information about enforcement warning notices


1.    The Building Societies Association represents mutual lenders and deposit takers in the UK including all 46 UK building
societies.  Mutual lenders and deposit takers have total assets of over £375 billion and, together with their subsidiaries, hold residential mortgages of £245 billion, 20% of the total outstanding in the UK.  They hold more than £250 billion of retail deposits, accounting for 22% of all such deposits in the UK.  Mutual deposit takers account for 31% of cash ISA balances.  They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.


2.    Section 391(1)(c) of the FSMA (as amended) provides the FCA with a power to publish such information about a warning notice as it considers appropriate.  The objective of the new power is to promote early transparency of enforcement proceedings.  The power applies only to disciplinary outcomes (under section 391(1ZB).  

3.    Section 391(6) provides that the FCA must not publish information if it considers that it would be unfair to the relevant person, prejudicial to consumer interests, or detrimental to the stability of the UK financial system.  At the end of the CP, there are two illustrations of hypothetical warning notice statements.  The BSA is pleased to respond to CP 13/7 (the CP) which specifically addresses the matter.

4.    Previous consultations, most recently CP12/37 and CP 13/6, have already canvassed aspects of the new power – the BSA responded to all prior consultation pertaining to the matter, which can be found here

Question and Response

5.    The CP contains only one question; ie –

Q1 – Do you agree with our proposed policy for the publication of information relating to warning notices?

6.    The BSA has commented in previous responses about the new pre-emptive powers, especially pre-publication of warning notices (ie at the early warning stage), and – while understanding the reasons for, and supporting, the introduction of stronger powers - has urged caution in the use of them, in order to avert a presumption of guilty until proven innocent.  

7.    Apart from the right of the person in respect of whom the FCA plans to publish the warning statement to make representations, that person’s key safeguards (ie representations to the Regulatory Decisions Committee and referral to the Upper Tribunal) would trigger after pre-publication happens.  Therefore, if the FCA gets it wrong, unfair reputational damage is likely to be suffered by the person before that person has had recourse to these mechanisms.

8.    In essence, the BSA’s continued view is that the onus is on the regulator to adopt a higher standard of care in cases where it is considering pre-publication because the matter will – at that stage – have been subject to neither the stringent scrutiny that is a pre-requisite of a final notice nor to ‘appeal’ arrangements.  It would be highly problematic, in reputational terms, for a firm to be subject to pre-publication of a warning notice if, on full investigation, the regulator gives it a clean bill of health.  Once in the public domain, conceivably there might be internal pressure within the FCA to adhere to its original position.  More important, it is highly unlikely that a discontinuance notice would receive the same level of media attention as the original warning notice.  Because of these likely pressures, there would be a significant responsibility on the FCA in relation to early publication.

The Building Societies Association
10 June 2013