Predictions 2023: The Regulators

We predict that 2023 will bring a more decisive new approach from the SFO.

Why?

• 2022 was an annus horribilis for the SFO; notwithstanding successful high-profile corporate convictions, the SFO saw individual convictions overturned and two reviews into how those cases were conducted (including into the actions of the Director), as well as public criticism from the judiciary, politicians and the market.
• The pending Economic Crime and Corporate Transparency Bill is expected to grant significant new pre-investigative powers to the SFO.
• A new Director of the SFO will be appointed in August 2023. The Director will need to take the lessons of 2022 into account and set out a new direction for the SFO, while working under increasing budgetary pressure and the need to demonstrate justification for the ongoing existence of the Office.
• We predict that the new Director will rise to this challenge, with a focus on delivering results while quietly implementing much-needed reforms from within.

Prediction authors: Nick Benwell, Camilla de Silva, Emily Agnoli, Jon Malik

We predict that in 2023 the FCA (with a more assertive approach to regulation) will open enforcement investigations to firms’ implementation of the Consumer Duty, rather than waiting for any harm to materialise.

Why?

• The FCA’s 2022/23 Business Plan was clear that it planned to take 'quick and effective action' and act 'assertively'.
• The Policy Statement on the Consumer Duty made it clear that 'By embedding the Duty in our approach to authorisation, supervision and enforcement, we will also increasingly focus on the outcomes customers experience. This, combined with our more data led approach, should enable us to intervene more quickly when we identify practices that negatively affect customer outcomes and more assertively before those practices become entrenched as market norms'.
• In August 2022, the FCA published its first Final Notice which covered how a firm had undertaken the implementation of a large-scale implementation project (in that case MAR implementation).
• The FCA has been clear that firms should expect to be asked to provide their implementation plans and October 2022 Board packs and Minutes to the FCA; this means that the FCA has the material required to detect an organisation which may be about to breach the Consumer Duty, and where early intervention would be appropriate.

Prediction authors: Caroline Hunter-Yeats, Mark Uttley

We predict that in 2023 the establishment of a new building safety regulator, alongside increased claims, will mean that training, awareness and regulatory compliance in relation to building safety will be of vital importance for anyone involved in the construction industry.

Why?

• The provisions of the Building Safety Act are being brought into force in phases, with additional detail being provided through secondary legislation, and the final parts are expected to be in force by October 2023. The Act will bring in a whole new regime for certain types of building works for 'higher risk' buildings, but some changes will also affect all types of building work under the Building Regulations.
• A new division of the HSE is being created to oversee building safety. The building safety regulator will oversee the safety and standards of all buildings, improve competence within the industry and lead the implementation of a new regulatory regime. The Act also allows the creation of a New Homes Ombudsman scheme to allow complainants to bring claims against members which will be determined by an independent Ombudsman.
• In addition to the many cladding claims already on foot since the tragic events at Grenfell, we anticipate a variety of additional claims. The Act introduces new causes of action under the Defective Premises Act and under the Building Act:
  • it will allow recovery by owners from certain persons in relation to certain products where they have caused a dwelling to be unfit for habitation;
  • the period within which claims under the Defective Premises Act can be brought has been extended; and
  • the duty to ensure that a dwelling is fit for habitation now also applies to future works on existing dwellings.
• The Building Act s.38 will allow a claim to be brought for damage or personal injury caused by a breach of certain duties under the Building Regulations, with a 15 year limitation period for claims (s135 BSA).
• A person who carries out a development in England that includes one or more dwellings (ie a new build home) will be required to provide the purchaser with a new build home warranty.
• Owners and certain other persons will be able to seek a Remediation Order or a Remediation Contribution Order from the First Tier Property Tribunal in relation to a relevant building, which Order would require a relevant landlord, developer of the building, or certain entities “associated” with those parties to meet the costs of remedying “relevant defects” Orders can be made against anyone with repairing obligations under a lease, including management companies, landlords and developers.
• The Act creates new or extended criminal offences (including in relation to liability of officers or directors in certain instances) in relation to construction process, including in relation to (i) breaches of Building Regulations; (ii) breaches of compliance or stop notices.

Prediction authors: Emily Monastiriotis, Sharlmaine Willetts