The FCA and PRA published a joint policy statement on 1 February announcing changes to the enforcement process intended to implement recommendations made by the Treasury and in the Green report. Outcomes from the consultation process include additional guidance on the FCA’s decisions to refer subjects to enforcement and when it will grant extra time to respond, a commitment to provide subjects of enforcement with more information about the regulator’s case upfront and at regular intervals during an investigation, a partial settlement process for subjects to agree some issues with the regulator but challenging other issues whilst keeping access to a settlement discount, and expedited access to the Tribunal when a subject wants to challenge the regulator’s decision.
These changes are improvements on the current system but do they go far enough?
The FCA is prepared to provide its preliminary findings and key evidence at the start of an investigation to encourage early settlement and/or narrowing of the issues. This will include documents that it relies on as well as an outline of the FCA’s findings. Although this is a positive change, it does not extend as far as it could. The FCA is not agreeing to disclose evidence at that early stage that does not assist the FCA, or evidence that might help the subject, or a list of all documents received/reviewed by the FCA. So, subjects will still need to analyse this information carefully and request additional documents in most cases.
Greater transparency is to be welcomed, but much depends on how this is applied in practice. Mechanisms for referral of limited issues to the RDC, and direct referrals to the Tribunal, may encourage more subjects to refer matters to the RDC or Tribunal. More Tribunal decisions on points of interpretation of the FCA's Rules are in the interests of the regulated community. Under the present system there remains very little case law to provide certainty to firms on the parameters of their regulatory obligations.