When the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) were set up in 2013, it was envisaged that enforcement would be a tool used mainly by the FCA, and that the PRA would focus on supervision.
However, the PRA has made greater use of its enforcement powers than many industry observers had expected. Although its enforcement activity is significantly less extensive than the FCA’s, it has nonetheless issued decisions against 12 firms (including fining a leading bank £17.85 million for failing to cooperate with its regulators) and against 4 individuals (list available here).
What is the EDMC?
The Treasury recommended in December 2014 that the PRA establish a functionally-independent decision-maker for contested enforcement cases, in order to ensure that contested enforcement decisions were made and perceived to be made independently of the PRA’s enforcement investigation team. “Contested” cases are those where settlement hasn’t been possible (e.g. where the individual or firm wants to fight the complaint, or where the regulator considers it inappropriate to settle).
In light of the Treasury’s recommendation, the Bank of England (the Bank) has established a new independent decision-making committee, the Enforcement Decision Making Committee (EDMC), to deal with such cases. The EDMC is made up of independent members, none of whom are employed by the Bank. To date, the Bank has appointed six EDMC members (list available here), with Sir William Blair (formerly the Judge in charge of the Commercial Court) as Chair.
The Bank also went further than the Treasury’s recommendation, giving the EDMC power to decide all contested enforcement cases brought by the Bank as regulator (including those relating to financial market infrastructure and resolution, as well as PRA cases).
How will the EDMC operate?
On 3 August 2018, the Bank published a policy statement on the EDMC’s procedure, setting out how the EDCM will operate (available here). In summary:
- The EDMC will first decide whether to issue a warning notice, on the basis of information and a recommendation provided by the Bank following an initial enforcement investigation.
- If the EDMC decides to issue a warning notice, the recipient is then entitled to make representations – these will usually be in writing, but the recipient may ask the EDMC’s permission to make oral representations. The EDMC need not grant this permission.
- The relevant Bank staff may respond to representations made where appropriate.
- The recipient of the warning notice may reply to the points made by the Bank in response.
- The EDMC will then consider all of the material before it, including written and/or oral representations, to decide whether to issue a decision notice against the firm or individual.
- The EDMC’s decision may be referred to the Upper Tribunal by the recipient of the decision notice.
