UK’s Financial Services Authority Statement Regarding Legal & General Tribunal Further Decision

The Financial Services and Markets Tribunal ("the Tribunal") has published its further decision dealing with the three matters arising from its decision of 18 January 2005, concerning Legal & General Assurance Society Ltd ("L&G").

The Tribunal has concluded that:

• L&G will pay a financial penalty of £575,000, a reduction from the original penalty of £1.1mn imposed by the Regulatory Decisions Committee ("RDC");
• there will be no order for costs, although the Tribunal criticises the Financial Services Authority's ("FSA") procedures;
• no recommendations are made to the FSA under Section 133(8) of the Financial Services and Markets Act 2000 ("FSMA") as the FSA is undertaking its own review of enforcement processes.

The FSA notes these conclusions and observations and, in particular, the Tribunal's criticisms of the transparency of the RDC process. These points are under active consideration as part of the FSA's wide-ranging review of enforcement processes, the outcome of which will be published in July.

Background:

1. The judgement is available on the Tribunal's website.
2. The FSA's review of enforcement processes, announced on 2 February 2005, is being led by David Strachan, FSA director of retail firms and sector leader for insurance. It is considering 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;
   • role and involvement of senior FSA management throughout these processes;
   • options for a fair procedure under which regulatory decisions are made by people separate from the investigators; and
   • accountability of decision makers to the FSA Board.
3. David Strachan is reporting to a committee of the FSA Board, which has co-opted as a member Tim Herrington, who took up his position as chairman of the Regulatory Decisions Committee on 1 February. The committee is also advised by Michael Brindle QC and Mr David Pritchard (former Deputy Chairman of Lloyds TSB).
4. According to Section 133 (8) of FSMA: "The Tribunal may, on determining a reference, make recommendations as to the Authority's regulating provisions or its procedures."
5. 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.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

Click here for details of the tribunal judgement.