Regulation  

FCA resists Treasury early enforcement deals demand

FCA resists Treasury early enforcement deals demand

The Financial Conduct Authority (FCA) will adopt a range of the Treasury’s demands over enforcement, but has resisted the call to encourage more firms to settle early and side-step misconduct probes.

In a consultation paper published last week, the FCA has revealed how it will implement proposals overhauling how it pursues those it believes to have broken its rules.

The bulk of the changes centre on improving communication between itself and those it is investigating for potential wrong-doing.

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This included introducing a “streamlined” process of “focused resolution agreement”, where the subject of an investigation can accept all facts relevant to the proposed enforcement action and all issues of whether those facts amount to a breach of FCA rules, but contest other claims by the regulator.

In such a case, a decision about whether the action taken should be a financial penalty or public censure, prohibition order or suspension, restriction, condition or limitation, and the appropriate level or scope of any such action is passed to the regulatory decisions committee.

For the benefit of the wider industry, it plans to publish more information on its website about early intervention work so other firms can learn lessons from the examples.

The FCA also intends to speed up the time between publishing a warning notice about a firm and any decision notice relating to it.

But the independent regulator has resisted calls from HM Treasury to “incentivise” firms to reach a financial settlement earlier in the enforcement process to avoid further investigations into potential misconduct at the firm.

The paper stated: “Any further incentivisation of early settlement will need to balance the desirability of the matter concludin.g quickly, with the need to ensure that the full extent of the misconduct is understood” the paper stated.

The FCA document added the regulator’s stance on enforcement investigations. It stated: “When we open an investigation, we have not decided that there have been breaches, nor what type of enforcement action, if any, should be taken if it turns out that there have been.”

The FCA declared its stance after the European Securities and Markets Authority (Esma) reported that the FCA takes a “selective approach” towards disciplinary action, often ignoring evidence of breaches.

The EU-wide regulator published a peer review on 7 March on how national regulators assessed compliance with MiFID’s suitability requirements when firms provided investment advice to retail clients.

laura.miller@ft.com