The Financial Times reported this morning that it had obtained information from the FCA on the number of private warnings it had issued over the last 5 years using a Freedom of Information Act request. The answer given was that there had been 39 of them.
ShareSoc has complained about this practice in the past, particularly with regards to AIM companies where the LSE has a similar approach. Indeed we complained about the use of private warnings in our submission to the FCA’s consultation on its “mission” only in January.
John Mann, M.P., who sits on the Treasury Select Committee was quoted in the FT article as saying: “Transparency is absolutely key. Anything that allows things to be dealt with in secret is damaging to the whole culture of financial services, and opens the regulator up to challenge”. One surely cannot but agree with that. Justice must be seen to be done as the well known aphorism goes.
Shareholders in companies do need to know if the FCA has criticised directors in the past, and the details of any such complaint. It also apparently causes problems for those handled in this way because they do have to disclose private warnings to new employers and can only appeal them if challenged with a judicial review (an extremely expensive process).
It’s that old “city club” mentality again. “We’ll just have a quiet word with the chap” rather than disclose it in public and damage his/her reputation seems to be the attitude. It’s surely time such practices were dropped. If it’s serious enough that the FCA formally investigates the matter, then any conclusion should be made public and the people involved named.
The ‘secret warnings’ culture not only deprives us as consumers of valuable information about the culture and conduct of firms, but also protects the FCA from legitimate public scrutiny. How can we be sure that all the right people have been warned, if we don’t know who they are and why they were cautioned?
It seems to me that we’re long overdue a Parliamentary Inquiry into whether the FCA is fit for purpose and, if not, what should replace it. Remember, this is the rump of the discredited FSA, from which the responsibility for supervising the stability of systemically important firms such as the big banks was taken following the global financial crisis. What we’ve learned since, the news coming out in dribs and drabs, is that it was also pretty useless at regulating conduct. Small wonder it’s failing, and time to put it out of its misery.