FCA to review ‘private warnings’ as part of transparency drive

The Financial Conduct Authority will review its use of private warnings to people suspected of rule breaches, according to a consultation document outlining its future plans.

In its ‘Our Future Mission’ document, published yesterday, the FCA asks whether private warnings are consistent with its desire to be more transparent.

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A private warning is a non-statutory tool used to put a person on notice that a breach may have occurred but that formal action will not be taken.

The FCA’s said a private warning does not provide a determination that a breach has occurred and ‘may give the impression that fair process has not been followed’.

However it added that many firms may appreciate that the warnings offer ‘a quick and clear resolution to concerns’ and this can be achieved more quickly than a full investigation.

Solicitors appear divided on whether a review was needed.

Elly Proudlock, counsel at international firm WilmerHale’s investigations and criminal litigation practice, welcomed the news.

She told the Gazette that private warnings can be ‘superficially attractive’, but that because they are taken into account when assessing fitness and propriety they can have ‘serious, long-lasting consequences’. 

‘Whilst they may be appropriate in certain types of case, they should not be used as a substitute for rigorous decision-making,’ she said.

But Jill Lorimer, partner at City firm Kingsley Napley, claimed private warnings had a ‘place and value’ within the enforcement tool-kit and warned against curtailing their use.

‘If there are transparency concerns, then perhaps there should be a concerted effort to promote understanding of the role and purpose of these warnings rather than seeking to limit their use,’ she said.

The FCA is also consulting on plans to replace the term ‘referral to enforcement’ with a neutral phrase to reflect the fact it is only a stage of an investigation process.

The FCA is inviting responses to its consultation online.

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FCA to review ‘private warnings’ as part of transparency drive