On 6 April 2014 the new Regulators' Code (the "Code") replaced the Regulators' Compliance Code, which dated back to December 2007. The Code applies to a range of non-economic regulators, including more than 50 national regulators, all local authorities and some regulatory functions carried out by government ministers.
The New Code
The Code is shorter and more direct than its predecessor, in response to the findings of the Government’s 2012-13 review and consultation on the old Regulators’ Compliance Code.
The Government's aims were:
- to increase the use of the Code by regulators, who had not universally adopted the principles of the old Regulators’ Compliance Code;
- to promote the Code amongst regulated businesses and bodies, in order that the Code be used as a form of constant reference for regulatory standards;
- to promote early dialogue between regulators and those that they regulate;
- to encourage a risk-based approach to regulation;
- to increase the transparency and accountability of regulators.
A regulator to which the Code applies must “have regard to the [C]ode in determining any general policy or principles” for the exercise of its regulatory function. This duty applies even indirectly, requiring national regulators to consider the Code when giving guidance to local authorities on their respective regulatory functions.
As stated in the preamble to the Code, any decision to depart from the provisions of the Code must be based on material evidence that another consideration outweighs non-compliance with the Code. Such a decision must be properly reasoned and recorded.
As before, the Code is underpinned by the statutory principles of good regulation in section 21(2) of the Legislative and Regulatory Reform Act 2006 (the "Act"). These principles require that regulatory activities be carried out in a way that is transparent, accountable, proportionate and consistent and be targeted only at cases where action is needed.
Specific Features of the New Code
The Code is based around six core objectives, which are as follows:
- “Regulators should carry out their activities in a way that supports those they regulate to comply and grow”
The duty to consider growth is given particular emphasis in the new Code, requiring regulators to take a proportionate approach and to minimise the negative economic impacts of their activities.
- “Regulators should provide simple and straightforward ways to engage with those they regulate and hear their views”
This section of the Code contains specific provisions about responding to non-compliance, identifying standards for the enforcement process. For example, a key requirement is for clear and accessible complaints and appeal processes. This is closely linked to the ability of regulated businesses to hold their regulator to account over compliance with the Code, an important aspect of the Government’s plans.
- “Regulators should base their regulatory activities on risk”
This section reinforces the requirement under the old Regulators’ Compliance Code that regulators act proportionately. Regulators are now required to draw up a risk assessment framework to increase their focus on an evidence-based approach to regulatory activities.
- “Regulators should share information about compliance and risk”
New emphasis is also placed on information-sharing to maximise the resources of the regulatory sector.
- “Regulators should ensure clear information, guidance and advice is available to help those they regulate meet their responsibilities to comply”
This section sets out requirements for the provision of advice and information upon which regulated businesses can rely to ensure their compliance. This section again brings in a requirement for regulators to co-operate, and reach agreement where any advice provided might conflict with that of another regulator.
- “Regulators should ensure that their approach to their regulatory activities is transparent”
One of the criticisms of the old Regulators’ Compliance Code was its lack of visibility amongst businesses, and its consequent lack of use in holding regulators to account. As such, the transparency and accountability provisions in the new Code are particularly robust. A crucial part of this section is the introduction of a requirement for regulators to publish service standards, setting out what regulated persons and businesses can expect from their regulator on a number of specific subjects, including checks, advice and complaints.
The Code provides that information published under the rules in this section must be clearly signposted on the regulator’s website.
The Government intend that the new Code is not to be referred to just once in creating internal policies, but should be a constant guide for regulators’ activities. As such, the Code requires regulators to publish data on their performance against their service standards. There is also a requirement that regulators have mechanisms to ensure that their officers act in accordance with the service standards, particularly in enforcement.
Implications of the New Code
Regulators that have not already begun the process of reviewing their policies and procedures for compliance with the new Code should do so now.
Regulators should pay particular attention to ensuring that their enforcement and complaints procedures are compliant. Meanwhile, regulated businesses should be aware that they can challenge their regulators where the procedures described in the Code are not followed. Regulators should also note that the Code provides that the Government itself will challenge regulators whose policies and standards do not accord with the Code.
In light of the emphasis on co-operation and information-sharing, regulators may need to take advice on confidentiality, privilege and data protection if agreeing mechanisms for sharing information.
The Code requires that businesses should have confidence that if they comply with any advice issued by regulators, they will not face enforcement action. It is therefore crucial that regulators think carefully about the implications of any guidance or advice given, as it is likely to be raised upon enforcement.
The Government aims to promote the Code amongst regulated businesses. Although the new Code does not present a radical departure from the old Regulators’ Compliance Code, it does indicate a shift in emphasis, and introduces certain new features, which must be taken into account by regulators and regulated businesses alike.