In draft financial services bill legislation published in June, it was stated that the FCA would be required to notify firms of a warning notice before any publicity could be issued on the investigation.

But the FSA disagrees with this and says it could "undermine" the effectiveness of warning notices.

In a memorandum in response to the draft financial services bill legislation the FSA said: "In our judgement this will seriously undermine the effectiveness of this power as we believe most, if not all, firms and individuals will object to details of the Warning Notice being published."

It said that the decision could lead to "satellite litigation" where firms obtained court injunctions to prevent publicity of the warning notice.

In response to these claims the FSA suggested that: "Our strong preference, therefore, would be for the requirement to consult the subject of the notice to be removed from the Bill.

"The effect would be to bring this provision into line with standard civil and criminal legal powers and would counter the suggestion that the regulatory process is disproportionately biased in favour of non-disclosure in the interests of financial services and industry practitioners."

The FSA also addressed the division of the approval of firms and the approval of individuals. It is proposed that the Prudential Regulation Authority is responsible for approving individuals but the FSA says that individuals should also report to the FCA.

The FSA said: "Our experience has shown that the attitude of firms' senior management towards conduct issues can be a real driver of the way firms treat their customers-which points to the need for FCA consent to the appointment of such individuals."

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