Regulator set to name and shame advisors before trial

Regulator set to name and shame advisors before trial

Regulator set to name and shame advisors before trial

Toronto advisors say a UK regulator may be going too far in the name of consumer protection and could tread on the rights of industry professionals in its quest for transparency.

The FCA confirmed this week that, at its will, warning notices identifying firms or individuals suspected of misconduct, including fraud or insider trading, will be published for investors, and everyone else, to see.

"It’s chilling to think that a regulator could publicly name a firm and individuals in a public way prior to even deciding whether to pursue actions against them," Cynthia Kett, with Toronto-based Stewart and Kett Financial Advisors, tells WP. "Obviously, it’s desirable to protect the public, but the mere hint of wrongdoing on the part of a firm/individual could be potentially fatal to the named parties." 

That's the reaction of several Canadian advisors casting a weary eye over the decision by the UK's Financial Conduct Authority (FCA) to air the dirty laundry of advisors under investigation, even before allegations are tried and true.

“It will be interesting to see the details,” says Toronto's Ryan Kerr, of Astrolabe Financial Group Inc. “It’s about trying to strike a balance between ‘innocent until proven guilty.’”

Traditionally, the FCA only released this information once a decision was made and a tribunal complete. The regulatory body’s efforts aim to increase transparency and provide investors with the information they need to make an informed decision about who should handle their money.

“Information is empowering to people,” said Kerr. “(You must) assume that people have to make their own informed choice, investigate all relevant facts before using an advisor or investing with an organization. You’d want to know as much information as possible.”

Critics of the FCA's power surge argue that prematurely releasing the warnings will permanently taint a firm’s name and reputation, even if a not-guilty verdict is delivered. The FCA defends that firms and individuals will be consulted and discretion will be used when selecting evidence to publish.

“It’s a huge issue,” said Kerr. “Anyone seeking information goes to the Internet. They will see the name of the organization, and stories about whether they are proven or alleged of malpractice or inappropriate conduct.”

Most warning notices result in fines and penalties, according to the FCA, which replaced the Financial Services Authority (FSA) in April. This year, up until March, the FSA issued 22 warnings - 10 of which resulted in penalties, 11 of which are outstanding, and one case was discontinued.

  • Doug McCaw 2013-10-21 7:12:39 AM
    Disclosure of advisor history via a Security Commission database is prevalent in the US and a helpful source of information to an investor making a decision regarding choice of an advisor. Nothing, however should be posted UNTIL an advisor has been charged by a responsible, totally independent ethics body AND such posting must be followed up with a posting of the decision once rendered. Let's protect the public!
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  • Katy 2014-01-03 3:31:02 AM
    Allegations should not be published until proven
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  • Bob White 2014-01-10 10:18:44 AM
    An allegation is exactly that until found guilty by why of the law of the land. Post complaints on the data base, but no public note until proven guilty.

    Advertise that if the public wants to check out an advisor's credibility, check the data base, make consumers more responsible for doing some due diligence to protect them and the good advisor's.


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