An issues paper published today outlines the legislation under which the FSA must operate, including the warning notice, decision notice and tribunal framework, and makes clear that the FSA is not contemplating any changes to primary legislation as a result of the Review. It does, however, note that within the constraints of the legislation there is considerable scope for flexibility in the process and the current model is not the only possible one.
David Strachan, FSA Director leading the review, said: "There has already been a lot of interest in the review and I hope today's paper will stimulate the debate further. The FSA and the industry now have over 3 years' experience of the current arrangements, so getting feedback on these issues is clearly an essential component of the review."
The paper sets out the objectives for the decision-making process, which were established through consultation before the FSA formally gained its powers in 2001. These are, broadly, that the process be fair and seen to be fair and be efficient and effective. The paper seeks views on whether these objectives remain valid.
The limits of who can take the decision to issue warning and decision notices is constrained by the requirement that those directly involved in establishing the evidence cannot take the associated decision. Moreover, the decision must be the FSA's. This means that it is not possible for the investigators to take the decision. Nor could the FSA delegate the decision to a wholly independent body or pass all disputed cases to the Tribunal to resolve. Within these limits, the paper seeks views on a range of questions relevant to how the decision-making process could be structured.
The paper also asks for views on the way the subjects of regulatory decisions may make representations and for views on the way cases can be resolved through settlement. Most Enforcement cases are resolved without referral to the Tribunal and settlement of a case is possible at any stage of the enforcement process.
The risk that costs to firms and individuals could increase is an important consideration. The scope of "regulatory decisions" that the FSA is required to make ranges from authorisation and approval decisions to decisions on change of control of authorised firms, as well as those on disciplinary action. The recent 150% increase in the number of regulated firms highlights the importance of the FSA having decision-making processes that work effectively for small firms (which now comprise over 97% of total regulated firms) and individuals, as well as for large firms.
Finally, the paper considers the accountability of decision-makers to the FSA Board and asks what additional information could be published about the operation of its decision-making process which would enable commentators to make a better informed assessment as to whether the process was operating fairly and effectively.
Submissions on the questions published today, or any other aspect or the review, should be sent to suggestions.enf-review@fsa.gov.uk. Roundtable discussions will be held in April to debate matters raised by the responses to the issues paper.
Background
- The issues paper concentrates on two elements of the Enforcement Process Review's terms of reference. The remaining two elements of the review cover: the processes followed by supervisors, enforcement staff and decision-makers when considering possible breaches of statutory or regulatory requirements, and the nature and extent of the communications and interactions between them; and the role and involvement of senior FSA management throughout these processes.
These remaining elements are an important part of this review and will receive full attention in the report and recommendations produced. However, rather than frame general questions on these issues, the FSA invites interested parties to make any specific points that they consider relevant. Many (although by no means all) of these points will be driven by individual experiences of the enforcement process. If interested parties have points which go beyond the terms of reference for the review, but which they nevertheless consider to be important for the outcome of the review, they should feel free to make them.
- The review was launched on 2 February (see press release) and is being led by David Strachan (Director of Retail Firms Division and Insurance Sector Leader, FSA) who reports to a committee of the FSA Board. The conclusions will be made public in July and any significant changes to the FSA's approach will be subject to consultation.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve our business capability and effectiveness.
