FCA publish Approach to Enforcement and Supervision
This article considers the Approach to Enforcement and Approach to Supervision papers recently published by the FCA.
The Financial Conduct Authority (FCA) has published its Approach to Enforcement and Approach to Supervision consultation papers. These documents form part of the FCA’s Mission (launched in October 2016) which seeks to provide greater focus, clarity and transparency about the work and priorities of the FCA.
The Approach to Enforcement document contains a number of interesting points:
- Enforcement as a regulatory tool - enforcement will not always be the appropriate regulatory tool and we can expect the FCA to pursue redress, remediation and other supervisory tools (such as informal guidance or early intervention) to address any harm identified. The FCA states that “severe penalties and sanctions alone are not enough to reduce and prevent serious misconduct. We must increase the likelihood of detection in tandem with efficient investigations”
- A clear focus on redress - the FCA continue to be focussed on customer redress and explicitly recognise that “Fines do not benefit the victims of wrongdoing, whereas redress directly compensates them. Redress can also deter misconduct by making the consequences of misconduct clear”. Firms who undertake voluntary redress may benefit from reduced financial penalties if subject to enforcement
- The threshold for investigation - an enforcement investigation will be commenced where the FCA suspects serious misconduct, rather than in respect of breaches which are “technical or minor”. The FCA will not pre-judge the investigation outcome and will only pursue enforcement action where there is sufficient evidence to justify starting proceedings. The FCA will take into account “the evidential merits of the case, whether there is a proper foundation for bringing the case and the public interest in deciding to start proceedings to obtain the appropriate remedy or sanction”.
- The enforcement process - the FCA recognise that it is under an obligation to act fairly and reasonably and the investigation process provides “several important protections and guarantees” including formal notification of the investigation, regular updates (including next steps in the investigation) and an opportunity for the subject to review any investigation findings before any formal action is commenced.
What next?
The FCA are seeking feedback on these Approach documents by 21 June 2018, with a view to publishing a final Approach document at the end of 2018. The Approach to Enforcement document also confirms that we can expect the FCA to publish further consultation papers on the Penalties Policy (to be published later this year) and the Enforcement Guide (to be published in 2019).
