Financial Conduct Authority And Prudential Regulation Authority Publish Final Changes To Enforcement Decision-Making Processes.

Author:Marshall, Helen

On 1 February 2017, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) published a policy statement which outlines the changes that will be made to the regulators' enforcement policies and processes ("Policy Statement").1 The FCA and the PRA have said that the changes are aimed at "strengthening the transparency and effectiveness of their enforcement decision-making processes."2

Key Changes

The FCA has already implemented some of the proposals it discussed in the course of consultation. For example:

Initial notice of investigation - When a decision to refer a matter to enforcement for investigation is made, the FCA will set out in writing (and give to the subject under investigation at the time a Memorandum of Appointment of Investigators is issued) a succinct summary of the potential breaches, an explanation of the matters giving rise to those breaches and an explanation of the criteria it has applied in coming to the decision to refer.

Regular review of the Regulatory Decisions Committee (RDC) - The FCA now publishes an annual review of the RDC (the first of which was annexed to the FCA's most recent annual report). The annual review considers matters such as the extent to which the RDC membership includes expertise appropriate to the areas in which the FCA is likely to take action and operational performance.

In addition, the FCA confirmed that the following proposals will come into effect on 1 March 2017:

Introduction of partly contested cases - This will allow a person under investigation to agree to some elements of a case (e.g., the facts, liability and/or appropriate penalty) and contest the other elements before the RDC while retaining the ability to obtain a discount on the penalty that reflects the extent to which the issues had been agreed.

Abolition of Stage 2 and Stage 3 discounts to penalty in settlement3 - This means that, in order to obtain a discount to the penalty, a firm or individual under investigation must settle with the FCA by the end of Stage 1 of the enforcement process (i.e., prior to a Warning Notice being issued). However, the FCA's introduction of partly contested cases means that the subject under investigation can still obtain a discount to the penalty without settling all elements of the FCA's case.

The PRA has said that it intends to publish a short guide to its enforcement procedures (including its referral criteria) and an additional policy statement on the establishment of an Enforcement...

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