11May

The Treasury has launched a review of the arrangements relating to enforcement activities of financial services regulators, and the processes these regulators use in reaching their enforcement decisions. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are included in the exercise. Many people have asked the question in recent years as to who regulates the regulators – exactly who are they accountable to?

In its press release on the subject, the Treasury comments that these regulators have wide-ranging powers, and considerable flexibility regarding how these powers are used.

It is then highlighted that the Government has recently brought activities such as LIBOR manipulation into the regulatory environment, and that it has legislated for a new approval regime for senior personnel within the banking sector.

Mention is then made of the fact that an enforcement regime is only effective if potential wrongdoers believe they are likely to be held to account for their actions, with meaningful penalties being imposed; and if the general public has confidence that these wrongdoers will be punished.

The Treasury has now launched a ‘call for evidence’ on the subject, and the responses to the consultation will be presented to the Chancellor of the Exchequer in autumn 2014.

The scope of the review includes:

  • The process by which suspected wrongdoers are identified for investigation
  • The process by which the FCA and PRA coordinate their investigations and their enforcement action
  • How the early settlement process operates
  • How the process in which disciplinary sanctions are decided works
  • The arrangements for making representations when subject to enforcement action
  • The arrangements for appealing enforcement decisions to the Upper Tribunal.

Speaking about the review, the Chancellor of the Exchequer, George Osborne MP, said:

“The government has taken action to provide a welcoming business environment for those in the financial services industry who play by the rules whilst ensuring that those intent on breaking them are held to account. I am committed to ensuring that the financial services regulators pursue a model of enforcement that delivers the appropriate balance of fairness, transparency, speed and efficiency.”