Last week the FSA laid the foundations of the FCA with the publication of “The Financial Conduct Authority – Approach to Regulation“. Whilst accepting the FCA will be accountable to government and Parliament, it will not accept that it is liable to those that are subject to its decisions. Brief mention of an “effective appeals mechanism” is lost amongst the government’s proposed acknowledgement of the importance of the new regulator’s decisions and the proclamation that the FCA will “ensure that its judgements are reasonable and proportionate”.
In contrast, the Complaints Commissioner’s Annual Report 2010/2011 is more clear, stating in the overview: “It should be noted that the FSA under FSMA is immune from liability in damages for any negligent act.” Of the complaints considered under the Commissioner’s complaints scheme in 2010/2011, only 4 related to Enforcement action. Those who suffer most have least recourse to possible compensation.
Those seeking to appeal an enforcement decision will, at least, still be able to have their case reviewed afresh by the Tribunal. Under the proposed new FSMA (published in draft with the changes proposed by the Financial Services Bill), in respect of non-disciplinary decisions (i.e. supervisory matters relating to authorisation, permissions or approvals, for example), the Tribunal’s powers will be reduced to those more akin to Judicial Review. In future, therefore, there may be a significant difference between the rights of appeal for someone issued a prohibition order by Enforcement and someone refused approval or whose authorisation is withdrawn even though the practical implications are much the same.
The FSA is intentionally being empowered to prevent undesirables operating in the sector but for those wrongly categorised as such there are increasingly few avenues of appeal or remedies available.