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I shall speak to amendment 159. I will try to be brief, but I want to press the amendment to a vote at the appropriate time. The issue here is around consultation before the disclosing of a warning notice. The PLS Joint Committee has recommended that the need to consult be removed from the Bill. Paragraph 258 of its report states:
“Requiring the FCA to consult could seriously undermine the effectiveness of this new power. The fact that the FCA will not be publishing the warning notice itself, but only the fact that it has issued one, and the fact that it will need to take into account a number of considerations in deciding what to publish should provide sufficient safeguards.”
Recognising the potential for reputational damage, the Joint Committee has recommended that the FCA publish guidance on how it will exercise its discretion in issuing early warning notices. My understanding is that the Government have chosen not to go down that route and not to take up that recommendation. The Minister therefore believes that the Government are striking the right balance between making the power usable and providing appropriate safeguards.
However, we still have concerns about the proposal, because, although many players in the financial services sector will be relieved that the recommendation was not followed, we have to ensure that we get the balance right between business and consumer interest. My main worry is that if someone is consulted about having a warning notice issued against them—perhaps the Minister can help us with this—they could simply take out an injunction to stop publication of the notice, which would effectively mean that no warning notice was issued. I hope that the Minister will explain how not publishing a warning notice will be in the best interests of consumers. If the appropriate safeguards are in place and the regulator believes that there is a valid case for warning, why do the Government not agree that the warning notice should be in the public domain?
A number of people are opposed to the warning notices. I will again quote the FSA figures obtained by MoneyMarketing, which reveal that nearly a third of enforcement cases in 2009-10 did not result in disciplinary action. I can understand partly where those people are coming from, but turning that figure round the other way shows that two thirds of enforcement cases did result in disciplinary action. Even on a Committee such as this, I would have thought that two thirds was a fairly decent majority. The FSA was right two thirds of the time, and if someone was going to purchase a financial product or, indeed, any kind of product, would it not be better that they received a warning about trusting the seller. That is important. Given the safeguards that would be in place that statistic could rise significantly.
Would the Government not find it reasonable to follow the recommendations of the Association of Independent Financial Advisers in its February memorandum to the FSA board committee that if for some reason a warning notice does not lead to disciplinary action, the FCA should introduce a fair process that would make it explicit that firms are exonerated when it is concluded that no wrongdoing has taken place? Again the Treasury Committee made recommendations on this issue. Could the Minister explain why, given that the FSA is right on some issues around recommendations in relation to publication, that he does not believe that the regulators in this instance should be held to the same account?
I will not go through all the information relating to Second Reading but the Financial Services Consumer Panel agrees with us and it felt that there would be strong industry pressure to bury bad news, as it described it, and delay publication, keeping consumers in the dark. It referred to thewidespread public belief that the current regulatory system has been weak and ineffective at protecting consumers. I ask the Minister for his response to that, particularly in relation to the comments from the PLS Committee and the Treasury Committee. I will want to press the amendment when the time comes.