Treasury: New regulator will be 'more transparent' than FSA

The government has bowed to industry pressure to make the new Financial Conduct Authority (FCA) more open and accountable to the industry and MPs than its predecessor the FSA.

In a consultation on the new body, the Treasury says greater transparency will be enshrined in the FCA's regulatory principles as "an essential aspect of how the regulator itself behaves".

"The transparency principle recognises the importance not only of ensuring that appropriate information is provided in respect of regulatory decisions, but also that the regulator is more open and accessible both to regulated community and general public," it says.

The paper says the importance of ensuring the new regulator conducts its business "as transparently as possible" was raised by many respondents to the previous consultation.

Under the new regime, openess will stretch to a new power for the FCA to publish warning notices issued against firms including before any formal action is taken.

Both the Prudential Regulatory Authority (PRA) and FCA will be issued with the power, which will include publishing details of the grounds on which action is being taken.

Responsibility for regulating markets and conduct across financial services firms, including imposing disciplinary measures, will be carried out by the same team currently responsible for conduct at the FSA.

"[These functions] which have to date been performed by the relevant specialist functions within the FSA, will be largely transferred intact across to the new FCA," the paper states.

However, while FSA staff may be moving to the FCA, the new body is to be made more accountable to Parliament than its predecesor when things go wrong.

In a nod to calls from MPs and industry practitioners, the paper proposes the FCA produces public reports where there has been a "regulatory failure", which ministers can use to hold the regulator's actions and decision making to account.

Elsewhere, the government says it will give the FCA new powers to force a firm to immediately withdraw or amend misleading financial promotions, and publish the fact it has done so.

"Greater transparency around misleading promotions will engender better practice across the industry by making firms' misconduct more visible," it says.

Responses to the paper's proposals can be sent by e-mail or in writing to the Treasury up to 14 April 2011.