FCA & PRA Publish Changes In A Policy Statement Aimed At Strengthening Decision-Making

The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have published final changes in a policy statement aimed at strengthening the enforcement of their decision-making processes through transparency and effectiveness.

 Financial services expert at Irwin Mitchell says the changes may result in more cases under FCA investigation being contested.

The FCA is the conduct regulator for 56,000 financial services firms and financial markets in the UK and the prudential regulator for over 24,000 of those firms. PRA was created as part of the Bank of England by the Financial Services Act 2012 as is responsible for the prudential regulation and supervision of around 1,700 banks, building societies, credit unions, insurers and major investment firms.

The changes cover a full life cycle of an investigation including changes to implement recommendations and address relevant responses to the joint FCA and PRA from;

• how decisions are made whether to refer an issue to Enforcement and Markets Oversight or the Regulatory Action Division for investigation
• the provision of more information to the subject of an investigation about why they have been referred for investigation
• regular updates throughout an investigation, as well as ensuring there is increased engagement with the subject
• effective levels of dialogue between Enforcement and Supervision during an investigation
• producing more detailed guidance on the process for joint FCA/PRA investigations. 

The FCA is also introducing a process for partly contested cases. This will allow a person under investigation to agree certain elements of a case (whether penalty, facts, liability or a combination of these issues) and contest the other elements before the Regulatory Decisions Committee. They will still have the ability to obtain a discount on the penalty that will reflect the extent that issues have been agreed.

In addition, the FCA is 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. The FCA is also abolishing penalty discounts at Stage 2 and 3 of settlement, and retaining the same panel that gave the warning notice to hear representations and decide whether to give a decision notice.