According to the regulator, the incoming Financial Conduct Authority (FCA) is committed to being transparent and open to scrutiny from consumers, firms and parliament.
To help achieve this aim the City watchdog is keen to gather views and ideas from interested parties which, if disclosed, would be helpful for firms and consumers.
Part of the discussion paper focuses on information the FCA could release about firms in order to foster an environment where the “industry is ‘on notice’ that we are constantly reviewing and exploring sectors”. The FSA reasons that this may provide reassurance around market cleanliness, although there are limitations surrounding what it can reveal.
Revealing review results
With regards to the thematic reviews the FCA will conduct on a regular basis, the regulator believes it can improve the content, clarity and accessibility of information.
It said requests for firm-specific results of thematic review are off-limits because it is constrained by law from disclosing such information, although the regulator concedes such disclosure could help stimulate competition between firms because consumers would be able to side-step poor quality service.
So firms are safe from a tattle-tail approach to regulation but much of its supervision action remains hidden from public view.
“The FCA is in a difficult position. In the interests of fairness, we are legally obliged to follow a process that provides a firm with an opportunity to make representations to us, which we must consider, before it is publicly censured.
“We also cannot issue general guidance on rules until we have gone through a formal consultation process,” the FSA says in the discussion paper.
Restrictions for good reason
Presumably such restrictions were put in place to avoid the FSA and its successor from shooting first and asking questions later. An example of this process working very well was during the consultation period on the proposed ban of Ucis products.
Following responses from the industry the FSA was forced to reconsider a blanket ban which would have prevented advising on and marketing of VCTs and some investment trusts to retail investors.
One option the FSA is considering for its successor body is to publish thematic work on an anonymous aggregated basis, which it believes could act as an incentive for firms to act without the need for more robust supervisory or enforcement action. This would also signal to the public areas where there are concerns or good practice.
In addition, the FSA says there has been an impetus to release more information around redress. This could influence firms to change their behaviour if they know the redress payments being made by their peers for similar failings.
But the regulator would need the consent of the firm to publish such information otherwise confidentiality constraints would apply. Again, the FSA is asking for feedback on proposals to publish how much redress a firm has paid out and disclose greater detail about why.
Charting complaints
Complaints data is a further area the FSA is looking to for greater disclosure, in terms of contextualising what the data tells us and to influence the behaviour of firms to the positive.
A good sign is that the FSA/FCA is giving interested parties the opportunity to submit thoughts and opinions before it acts – it asks for responses by 26 April.
The new City watchdog, under Martin Wheatley’s leadership, is also mindful of enhancing disclosure in the right areas for the right reasons.
“Transparency cannot be an end in itself. We want to make sure that disclosure helps customers make the right decisions when purchasing products and helps the market function more efficiently.
“This is not a one-off exercise. As the FCA develops we will continue to identify additional ways to increase transparency and will be open to feedback from our stakeholders about how this can be achieved.”
We often moan about the FSA’s hard-handed approach, and here it has opted to go a bit more softly-softly. Take your chance and get involved.
Meanwhile, use the comments box below to let us know what you think about increased transparency and disclosure as discussed above.
