Use of secret warnings issued by UK FCA and Irish Central Bank. Should regulators published full details under a 'name and shame' doctrine?

Date: 6 March 2017: Should all details, including the identities of persons, found wanting by financial services regulators be published? As a former senior regulator responsible for enforcement actions in Ireland (Central Bank of Ireland, Director of Enforcement), UK (FSA, Enforcement Lawyer), Australia (Legal Division and Registrar) and a short stint in Saudi Arabia (Advisor on Enforcement, SAMA), I have often wondered about benefits of private warnings and similar tools [NB: And have had them issued from my Directorates]. On the one hand they can be seen as an effective means to delivering an appropriate outcome in a given set of facts where lengthy enforcement proceeding are not in the public interest. On the other hand, if a matter is so serious as to require the diverting of regulatory resources to deliberating in some detail about the real likelihood of an actual breach, shouldn't the public have the right to know about an adverse outcome? Why should a public interest regulator decide on behalf of the public (whose interest they serve and are often funded by) which adverse decisions should be made public and which should not? This is more so the case where there is no statutory framework for such enforcement tools.

I got to thinking about this topic when reading of this softer form of disciplinary action in the Financial Times over the weekend where Caroline Binham wrote that the UK FCA has rebuked 39 senior financial services executives for failings which investors, consumers and the wider public will never know about. Of these 39 senior UK executives censured over the past 5 years, 14 still hold authorised roles. Read Caroline’s article here https://www.ft.com/content/08cff312-002f-11e7-96f8-3700c5664d30. The FCA’s use of secret cautions for top brass spiked in 2012, when 21 senior executives were censured out of a total 64 private warnings issued. The bulk of these related to the Libor-rigging scandal, according to people familiar with the situation.

Intrigued by the article, I looked at the Central Bank of Ireland’s use of so called private warnings, which it refers to as, broadly speaking, ‘Supervisory Warnings’ and ‘Securities Law Formal Private Cautions’. Although there is no public definition of the latter, a ‘Supervisory Warning’ (the decision to issue which is at the sole discretion of the Central Bank) is “a written warning notifying the regulated entity that the Central Bank considers that it has not complied with certain regulatory requirements, and calling upon the regulated entity to rectify the matter(s) identified.”. Although not a statutory tool, the fact that a Supervisory Warning has been issued previously may influence the Central Bank’s decision as to whether to commence an Investigation against a regulated entity. These warnings are considered cumulatively, taking into account the date on which the Supervisory Warning was issued. Supervisory Warnings are not published by the Central Bank, however it isn’t hard to find the details of the number of such actions by doing some research. In Ireland, since 2009 (inclusive), the Central Bank has issued 65 Supervisory Warnings and (intriguingly named) Securities Law Formal Private Cautions. If I look at just the last 5 years of publicly available records in Ireland, the figure is 60. Interesting when you compare to the last 5 years of records in the UK, where the figure is 62 for Private Warnings. 

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