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The Financial Conduct Authority (“FCA”) and the Prudential Regulation Authority (“PRA”) have published a joint policy statement on the proposed implementation of HM Treasury's (“HMT”) review of enforcement decision-making at the FCA and the PRA and Andrew Green QC's report into the FSA's enforcement actions following the failure of HBOS plc (see here for the joint policy statement). The policy statement outlines the amendments to the FCA’s Glossary, the Decision Procedure and Penalties manual and the Enforcement Guide.
The joint policy statement has its origins in the regulatory response to the financial crisis of the last decade.
HMT Review and the Green report
On 18 December 2014, HMT published its Review of enforcement decision-making at the financial services regulators (the “Review”) (see here). The focus of the Review was on the transparency, fairness, effectiveness and speed of the FCA’s and PRA’s enforcement decision-making processes. The Review made a number of recommendations to the FCA and PRA with a view to improve decision-making at both regulators.
On 19 November 2015, the PRA and the FCA published two reports: (1) A joint report into the failure of HBOS plc; and (2) Andrew Green QC’s Report into the FSA’s enforcement actions following the failure of HBOS (the “Green Report”) (see here). The Green Report made four recommendations, three of which were relevant to the Review recommendations, namely: (1) pre-referral decision-making, (2) continuing dialogue between enforcement and supervision during an investigation, and (3) informing the subject of an investigation about the matters under investigation.
FCA and PRA joint consultation paper
On 14 April 2016, the FCA and PRA published a joint consultation paper on proposals to implement the recommendations made in the Review and the Green Report. The joint policy statement, published on 1 February 2017, reflects the outcome of this consultation process.
Amendments to enforcement policies and processes
The joint policy statement indicates the changes that the FCA and PRA have made (or will be making) in respect of enforcement policies and processes. These are as follows:
Other changes include the following:
The FCA’s proposals that have not already been put into practice will be implemented by the amendments to the FCA Handbook . The majority of these will came into effect on 31 January 2017. Two proposals that are potentially of most interest will come into effect on 1 March 2017:
See Appendix 1 of the policy statement for the instrument providing for the consequential amendments to the FCA Handbook, namely the Decision Procedure and Penalties Manual and Enforcement Guide (Review) Instrument 2017 (FCA 2017/4).
The PRA will be issuing a policy statement later this year to explain in further detail its enforcement processes.
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