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Calls for more transparency over FSA's investigations
05 August 2010
The FSA has come under pressure to be more open over its investigations, and is facing accusations that it is failing in its duty to consumers. It comes after the FSA declined to comment on whether it would investigate Citigroup which agreed to pay $75m (£47m) to settle civil charges brought by US watchdog, the Securities and Exchange Commission, that it misled investors over potential losses from high risk, sub-prime mortgages. Alan Lakey, partner for Hertfordshire-based Highclere Financial Services and founder of the Adviser Alliance, said: "The FSA has a difficult balance. If five clients complained about me and they were to make a public pronouncement it would have a massive affect on my business. "Equally they have got to be seen to be doing the job. It is a difficult balance. They have my sympathy. The problem is they have this automatic response even when you know they are doing something. The very nature of secrecy normally means we think the worst." A spokesperson for consumer watchdog Which? said: "Whether the FSA is investigating a company for how they treat customers in mortgage arrears or complaints they should always make that public so people are aware what is going on." An SEC investigation alleged Citigroup had made misleading statements about the extent of its exposure to sub-prime loans. In 2007, Citigroup said its exposure to sub-prime mortgages was $13bn or less, when the SEC believed it exceeded $50bn. Citigroup neither confirmed or denied the SEC claims. The FSA declined to say whether it would launch a similar investigation into Citigroup in the UK. When asked about a duty to investors a spokesman said there were teams who would be in touch if relevant. Goldman Sachs paid a $550m SEC fine earlier this month, the largest ever imposed on a bank, on charges that it had marketed sub-prime mortgage investments without providing full information to investors, but did not admit to any wrongdoing. The FSA said at the time that it was investigating. An FSA spokesman said: "We always look at how other countries regulate and what they are doing. Whether an investigation is launched or not depends on whether the enforcement team and the supervisors decide that something needs to be done." David Kenmir, formerly of the FSA and now director in PWC's financial services regulatory practice, said: "The FSA can launch an investigation into any UK authorised firm or its offshore activities if it is in breach of FSA regulations. "When the SEC fined Goldman Sachs over its sub-prime mortgage investments, it was talking to the FSA because the trader involved was based in London and had to testify in the US. Ray Boulger, technical director for London-based John Charcol, said: "The FSA has already been looking closely at some of the sub-prime lenders and fined GMAC £7.7m last year for not treating customers in arrears fairly. "A Northern Rock director was fined for understating the number of mortgages in arrears, so the FSA is aware of the problem but I cannot envisage it fining on this scale in the UK." Published by FT Adviser
