FSA Unveils Enforcement Review Plans

by Robin Pilgrim, LawAndTax-News.com, London

21 July 2005

The UK's Financial Services Authority on Tuesday published the recommendations made in the review of its enforcement process.

The review was commissioned in February by the FSA Board after aspects of its process were criticised by the Financial Services and Markets Tribunal and because it was evident that many affected by enforcement actions had doubts about the fairness of the process.

The review was led by David Strachan, director of retail firms, advised by Michael Brindle QC and David Pritchard, recently retired deputy chairman of Lloyds TSB.

Key recommendations made in the report were that:

• There should be no change to the FSA's risk-based approach, in that it cannot attempt to pursue every rule breach and so selects cases according to their seriousness and how they fit with its priorities;
• There must be clear separation between those who investigate possible rule breaches and those who decide whether the conduct in question should be sanctioned;
• Measures must be taken to strengthen the Regulatory Decisions Committee's objectivity;
• The principle of separation should be extended to cover cases that are settled rather than decided by the RDC, as at present, the RDC is involved in settlements, including setting 'settlement parameters' for the FSA staff tasked with conducting the settlement negotiations, and approving the terms of the settlement;
• An explicit discount system should be put in place for those who settle their cases early in the proceedings;
• The FSA should seek feedback from those involved in enforcement cases;
• The FSA should publish an annual performance account for enforcement; and
• In the case of the rejection of applications for authorisation and approval by firms, the FSA Executive, rather than the RDC, should take the decision to issue a warning notice, but representations and the final decision should continue to be taken by the RDC.

The review's recommendations have been accepted by the FSA Board.

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