ENF 11.3 Private warnings

In certain cases, despite having concerns regarding the behaviour of a firm or approved person, the FSA may decide that it is not appropriate, having regard to all the circumstances of the case, to bring formal disciplinary action. In these types of case, the FSA considers that it will be helpful for a firm or approved person to be made aware that they came close to being subject to formal disciplinary action, and may to that end, if appropriate, give a private warning. (It is, of course, open to the FSA not to give a private warning if it does not consider that one is necessary.)

Examples of circumstances where the FSA will tend to give a private warning rather than take formal disciplinary action include where the matter giving cause for concern is minor in nature or degree, or where the firm or approved person has taken full and immediate remedial action. However, these circumstances on their own will not determine the course of action taken by the FSA.

Generally, the FSA would expect to use private warnings in the context of firms and approved persons. However, the FSA may also issue private warnings in circumstances where the persons involved may not necessarily be authorised. For example, private warnings may be issued in potential cases of market abuse (see ENF 14), cases where the FSA considered making a prohibition order (see ENF 8) or a disapplication order (see ENF 18).

In relation to firms and approvedpersons, a private warning will state that:

1. (1)

   the FSA has had cause for concern arising from the conduct of a firm or approvedperson, although no determination that a firm has contravened a requirement, or that an approved personhas been guilty of misconduct, has been made by the FSA;

2. (2)

   the FSA does not at present intend to take formal disciplinary action, having regard to all the circumstances of the case;

3. (3)

   the private warning will form part of the firm's or approved person's compliance history, and may be taken into account in deciding whether the FSA brings disciplinary action against the firm or approved person in the future; and

4. (4)

   the FSA requires the firm or approved person to acknowledge receipt of the warning letter and invites the firm or approved person to comment on the private warning if they wish to do so.

Where the FSA gives a private warning to an approved person, it may if appropriate inform the approved person's firm (or employer, if different).

Private warnings, together with any comments received in response, will form part of the firm's or approved person's compliance history. As such they may influence the FSA's decision whether to commence disciplinary action in relation to future breaches. However, where disciplinary action is commenced in those circumstances earlier, private warnings will not be relied upon in determining whether a breach has taken place, or in determining the level of sanction, if any, to be imposed.

Where the FSA is assessing the relevance of private warnings in determining whether to commence disciplinary action, the age of a private warning will be taken into consideration. However, a long-standing private warning may still be relevant.

Private warnings may be considered cumulatively, although they relate to separate areas of a firm's business, where the concerns which gave rise to those warnings are considered to be indicative of a firm's compliance culture. Similarly, private warnings issued to different subsidiaries of the same parent company may be considered cumulatively where the concerns which gave rise to those warnings relate to a common management team.

As well as private warnings, it is also open to the FSA to indicate to a firm in ordinary correspondence that the FSA has concerns about a particular aspect of the way it conducts its regulated activities. This correspondence may, for example, have arisen from a supervision visit. This correspondence will also form part of a firm's compliance history.