The Financial Conduct Authority has moved forward with changes to its decision-making process despite industry concerns over a possible lack of fairness and objectivity.
In a policy statement published today (November 26), the FCA said the changes, which will see more decisions taken by its senior managers rather than the Regulatory Decisions Committee, would allow the regulator to make decisions “faster and more effectively” .
The FCA said the vast majority of respondents to its consultation had agreed with the aims of the proposals but did not agree with how they would be implemented, particularly the bypassing of the RDC.
“There was a concern that speed and efficiency were being emphasised unduly and would increase the potential risk of a lack of fairness and objectivity in decision-making,” it said.
“Most respondents who opposed the changes did so on the basis that the RDC is seen as an essential element in providing procedural fairness because of its ability to act as a check and balance on the executive, and because of its independence and objectivity.”
Concerns were raised about the risk of bias and that it would be difficult to separate the process of investigation and the decisions being made by the executive.
Some felt the operational independence of the RDC meant these risks were easier to avoid.
Responding to these concerns, the FCA said it had “carefully considered” whether to make any changes in light of the comments received but would implement the proposals as consulted on.
“We recognise that the desire to intervene more quickly must be balanced with procedural fairness,” it added. “However, we believe that our executive procedures, through which a number of decisions on authorisations and interventions are already made, do provide a fair process.”
Today's paper follows the regulator's update earlier this year stating it was consulting on streamlining decision making on authorisation applications and specific supervisory and enforcement decisions.
In its business plan for 2021/22, the FCA said one way to “prevent and stop harm faster” was making changes to areas within its control, including taking "greater risks" when making decisions.
It was consulting on changing the balance of decisions taken by the executive and its RDC so it could "intervene in real time".
The changes will allow the RDC to focus on significant misconduct cases, where harm has already materialised, while other categories of decision will move from the RDC to the executive.
These include decisions relating to a firm’s authorisation or an individual’s approval, intervention powers to impose a fundamental variation of permission or requirement, taking action in straightforward cancellation cases, and commencing civil proceedings.
Specifically, the FCA’s senior managers will now able to take decisions on:
- a firm’s authorisation or an individual’s approval
- action in straightforward cases to cancel a firm’s permissions and that action is contested
- starting civil proceedings, such as seeking an injunction
- starting criminal proceedings, such as a prosecution for insider dealing
- using the FCA’s powers to vary or limit a firm’s permissions
- using the FCA’s powers to impose requirements on a firm
The FCA’s independent RDC is the final decision maker on contested enforcement, supervisory and authorisation interventions.
In April, Nikhil Rathi, who joined the FCA as chief executive in autumn last year, said the regulator was reviewing the RDC.
At the time he said: “Our review asks whether decisions on authorisation or on supervisory interventions could be made in a more streamlined way.
“And whether this would better enable quick, decisive action, particularly to prevent entry or allow removal from our markets of those unable or unwilling to meet our standards.”
In June at a Treasury Committee evidence session, the FCA boss reiterated the regulator was thinking about how it can streamline decision making to speed up the process.
sonia.rach@ft.com
What do you think about the issues raised by this story? Email us on FTAletters@ft.com to let us know
