Financial regulators work towards increasing transparency
The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have published final changes in a Policy Statement (PS) on enforcement decision-making processes after a public consultation last year.
The changes comes after the regulator received criticism over how it handled the collapse of lender HBOS during the financial crisis.
The FCA is introducing a process for partly contested areas, which will allow a person or company under investigation to contest certain elements of a case without losing discounts on penalties.
Firms under investigation will be given more information about why they are being looked into, along with regular updates during the investigation.
There will also be a close dialogue between enforcement and supervision during an investigation.
The regulatory body is also providing a mechanism for those under investigation to proceed more directly and quickly to the Upper Tribunal, providing external adjudication that is wholly independent of the FCA.
Penalty discounts at Stage 2 and 3 of settlement will be abolished while retaining the same panel that gave the warning notice to hear representations and decide whether to give a decision notice.
For the PRA, further work is planned for this year to ensure that other recommendations are implemented, including follow-up work on the 2016 consultation on an Enforcement Decision-Making Committee, production of a short guide to PRA enforcement procedures, including referral criteria and a review of the PRA’s approach to settlement.
More detailed guidance will be provided on the process for joint FCA/PRA investigations. Decisions on whether to refer an issue to Enforcement and Markets Oversight or the Regulatory Action Division for investigation will also be looked into.
Mark Steward, director of enforcement and market oversight at the FCA, said: “It is essential that our enforcement decision-making processes command public confidence and operate both efficiently and fairly. The changes set out in today’s PS are designed to achieve just that and reflect the views of stakeholders who responded to our consultation.”
Miles Bake, head of the Legal, Regulatory Action division of the PRA, said: “The PRA’s enforcement processes must be clear, transparent and reasonable. This policy statement outlines a number of concrete steps the PRA is taking to ensure that we implement the recommendations from the HMT Enforcement Review and the Report of Andrew Green QC.”