Tomorrow (1 February 2017), the FCA and the PRA are due to announce their final positions on the changes they are proposing to make to their ENFORCEMENT DECISION MAKING PROCESSES, following HM Treasury’s recommendations.
Mr Steward flags that some of the proposals floated by the FCA, in particular, seem particularly timely given the shift in enforcement dynamic we have seen and the introduction of the Senior Managers Regime. For example:
Focused Resolution Agreements: The FCA is proposing to introduce Focused Resolution Agreements which will allow firms and individuals to agree on facts and breaches during Stage 1, but challenge the FCA’s proposed sanction before the FCA’s RDC while still retaining their 30% early settlement discount. The FCA may expand the scope of these Focused Resolution Agreements to allow firms and individuals to challenge limited sub-sets of facts and breaches before the FCA’s RDC. The introduction of Focused Resolution Agreements is likely to make for less of an ‘all or nothing’ approach when it comes to settling FCA enforcement cases. These Agreements are also likely to increase the odds of firms challenging cases before the RDC which, up until now, has been relatively uncommon in practice.
Fast track to the Upper Tribunal: The FCA is also proposing to introduce a fast track to the Upper Tribunal, which would allow firms and individuals to refer their cases to the Upper Tribunal without first having to make representations to the RDC. This proposal could help to save costs, increase the number of valuable Upper Tribunal judgments handed down (which, unlike FCA decisions, have precedent value) and also alleviate some of the backlogs of cases faced by the RDC at the moment. It remains to be seen what would happen if a firm and an individual were being investigated about the same matter and the individual opted to follow this fast track to the Upper Tribunal. How would the different timelines of these cases align? What publicity would there be about the individual’s reference to the Upper Tribunal and how could this impact the position of the firm under investigation?
The impact of the change in FCA senior management seems to have made its mark on the FCA’s enforcement strategy over the past year. It will be interesting to see how things develop over the coming months in this area. For example, how the FCA will approach enforcement referrals, whether the FCA will undertake more detailed investigations and whether the FCA will continue to make greater use of alternative non-financial sanctions, such as business restrictions.
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