What powers do national financial services authorities have to examine and investigate compliance? What enforcement powers do they have for compliance breaches? How is compliance examined and enforced in practice?
Both the FCA and the PRA have a number of powers to investigate and take disciplinary action against firms and individuals who breach regulatory and some legal requirements.
The FCA has significant powers of investigation and information gathering, which it can exercise against authorised firms. These powers are set out in the FSMA, and include powers to:
- require information and documents from authorised firms and connected persons;
- require a report on an authorised firm by a skilled person (and in some cases to appoint that person); and
- appoint both general and specific investigators.
The FCA has a number of disciplinary and enforcement powers, the most commonly used being the ability to issue public statements and censure, and to impose financial penalties. The FCA can also:
- vary or withdraw a firm’s regulatory permissions, and impose restrictions or suspensions on a firm’s ability to carry on regulated activities;
- withdraw or suspend an individual’s approval, or restrict them in, or prohibit them from, performing certain functions;
- apply to court for injunctions in connection with certain matters; and
- prosecute certain criminal offences, including insider dealing and money laundering offences.
The FCA’s overall approach to enforcement is a strategy of ‘credible deterrence’ (ie, to deter firms or individuals being disciplined from reoffending and to deter others from making similar mistakes). The FCA has published guidance on its policies and procedures and approach to enforcement in its Decision Procedure and Penalties Manual and its Enforcement Guide. The FCA consulted on its approach to enforcement during 2018 and is expected to publish the results of its consultation and undertake a fuller review of its Enforcement Guide in due course.
The PRA has broadly the same information gathering powers as the FCA against PRA-authorised firms and connected persons, and can also require the provision of skilled persons reports (and to appoint skilled persons) and appoint investigators.
Like the FCA, the PRA has enforcement powers, although it is only able to impose penalties on PRA-authorised firms. The PRA has published statements of policy and procedures detailing how it will exercise its powers to impose financial penalties and suspensions, or impose restrictions on firms or approved persons.Disciplinary powers
What are the powers of national financial services authorities to discipline or punish infractions? Which other bodies are responsible for criminal enforcement relating to compliance violations?
See question 9. Various other bodies are responsible for compliance enforcement in the UK, depending on the relevant legal or regulatory requirement. For example, the Information Commissioner’s Office is the regulatory authority responsible for enforcement of breaches of UK data protection legislation, while the Office of Financial Sanctions Implementation (part of HM Treasury) enforces financial sanctions in the UK.Tribunals
What tribunals adjudicate criminal and civil financial services infractions?
The FCA and PRA each have an internal decision-making process that applies in the context of enforcement action.
The FCA’s Decision Procedure and Penalties Manual provides guidance on the nature and procedure of the FCA’s Regulatory Decisions Committee, which is (in most cases) responsible for deciding whether to take enforcement action following an investigation. In August 2018, the Bank of England introduced an Enforcement Decision-Making Committee in respect of contested PRA enforcement actions.
Decisions taken by the FCA or PRA may be appealed by firms and individuals to the Tax and Chancery Chamber of the Upper Tribunal of the High Court.
A criminal prosecution brought by the FCA or PRA would be instituted in the criminal courts in England, Wales or Northern Ireland.Penalties
What are typical sanctions imposed against firms and individuals for violations? Are settlements common?
Typically, fines are levied by the PRA and FCA against firms for violations. Discounts are ordinarily applied where firms cooperate with the regulators and for early settlement. In 2018, the FCA imposed fines of approximately £60.5 million, including a fine of £32.8 million levied against Santander UK plc for governance breaches and the unfair treatment of customers in relation to serious failings in its probate and bereavement process.