The Treasury has published the financial services bill this morning, which sets out in law how the regulatory structure under the Prudential Regulation Authority and the FCA will work in practice.
It has been subject to a lengthy drafting process which began when Chancellor George Osborne announced in June 2010 the FSA would be scrapped in favour of a new regulatory structure.
One of the new powers to be granted to the FCA which has proved controversial is for the new regulator to publicise enforcement investigations at an earlier stage. Currently the FSA publishes details of enforcement cases once it has completed its investigation. However the FCA will be able to publicise the details of firms and individuals at the warning notice stage.
The draft bill required the new regulator to consult the firms involved before publicising the enforcement investigation. The FSA wanted this requirement removed, arguing that firms would look to block publication through the courts.
A joint committee of MPs and Lords published a report before Christmas recommending changes to the bill , which backed the FSA over removing the requirement to consult.
However the Government has rejected this argument, saying “the right balance has been struck between making the power usable and providing appropriate safeguards for those affected”.
Guidance on the bill states: “The Government notes the requirement to consult does not mean the regulator must seek the consent of the firm or individual in question, but considers that pre-disclosure dialogue is crucial to allow the regulator to determine whether disclosure is appropriate in the circumstances.”
But the bill also reveals that under the FCA firms will have less time to represent themselves to the regulator before their case is progressed.
Currently at the warning notice stage firms have 28 days to make oral or written representations to the Regulatory Decisions Committee, before a decision notice is published.
The bill reduces this period from 28 days to 14 days “in order to enable the regulators to take disciplinary action more expeditiously”, for example where wrongdoing has already been admitted.
The FCA may extend this period on a case-by-case basis.
The bill could still change significantly as it goes through Parliament and MPs propose amendments.