The FCA and PRA have published proposals aimed at strengthening the transparency and effectiveness of their enforcement decision-making process. This is in response to recommendations made by HM Treasury in its ‘Review of enforcement decision-making at the financial services regulators’ (published in December 2014) and Andrew Green QC’s ‘Report into the FSA’s enforcement actions following the failure of HBOS (published in November 2015) (the Green Report).
The consultation paper explains the changes that have already been put into practice by the regulators and sets out the recommendations requiring consultation, and the proposals for implementing them. The PRA notes that it intends to consult separately later in 2016 (once the Bank of England and Financial Services Bill has passed through Parliament) on the recommendations relating to settlement and contested decision-making. It also intends to publish its enforcement referral framework alongside its implementation of these recommendations.
In chapters 3 and 4, the FCA and PRA consult jointly on how they will co-operate in enforcement investigations, and on subjects’ understanding and representations in joint enforcement investigations. These proposals address both the HM Treasury Review and Green Report recommendations.
The FCA also proposes in chapters 5 and 6, to amend the Enforcement Guide and the Decision Procedure and Penalties Manual to provide a framework and incentives for partly contested cases. This will allow enforcement proceedings to be resolved when an individual or firm agrees all relevant facts and the breaches which arise from those facts, but wishes to contest the appropriate regulatory outcome before the Regulatory Decisions Committee. No changes are proposed to the process for agreeing a full resolution of all issues.
The deadline for responding to the consultation is 14 July 2016. Once comments are reviewed, a Policy Statement will be issued.