UK: The FCA's Enforcement Mission

Last Updated: 11 June 2018
Article by Mishcon De Reya

Readers will recall that we reported last year on the FCA's articulation of its Mission " The FCA Sets Out its Mission"  and the publication of a joint FCA and PRA statement on their approach to Enforcement " FCA and PRA Publish Joint Statement on Enforcement". In a similar vein, on 21 March 2018, the FCA published this year's Enforcement Mission. Whilst there is very little material in the document that will be new or surprising for practitioners, there are some interesting statements of policy and aspiration.

The FCA says that its overriding approach to Enforcement is to achieve a fair and just outcome in response to misconduct. In a step away from "credible deterrence", the FCA notes that severe penalties (whilst important to deliver the FCA's message) are not alone enough to reduce and prevent misconduct and must be combined with effective early detection and efficient investigations. 

On the early detection of harm, the FCA says its focus is on gathering information and intelligence in order to identify potential/actual misconduct as soon as possible. This is achieved through a variety of information channels, both internal (Market Oversight, Supervision and Authorisations) and external (other regulators, authorities and whistleblowers). In this context, a separate paper has also been published by the FCA outlining its approach to Supervision, which is said to be forward looking, pre-emptive and to focus on strategy and culture as the root cause of major failings. 

The FCA says that it will start an investigation where it suspects serious misconduct, although it reiterates that the purpose of the investigation is to get a full understanding of whether in fact such misconduct has occurred. Whilst it lists out some of the criteria feeding into the assessment of suspected serious misconduct, much will already be familiar to practitioners from the Enforcement Guide and referral criteria. 

On the conduct of investigations, practitioners may be interested to see that the FCA identifies part of its approach as being the conduct of efficient and fair investigations. This includes the cessation of investigations where it is clear that there is no serious misconduct and providing subjects with regular updates and information about next steps. The document does note the difficulty of investigating historic events and (in an apparent nod to the length of some investigations, albeit somewhat optimistically) urges those subject to investigation to do the right thing such as offering redress or agreeing to vary permissions, even before the investigation is concluded. No doubt many will view these as aspirational statements that do not reflect the reality of more complex investigations, particularly where both firms and individuals are under scrutiny.

Also on the conduct of investigations, the FCA says that it adopts a strategic approach designed to identify the "heart of the case". This is in order to focus on key evidence and to take a decision on whether to continue or close the investigation. However, many practitioners will see the risk here of the FCA taking key decisions without considering the wider evidential context. 

A consultation paper in relation to penalties is anticipated for later in 2018, with a consultation on the Enforcement Guide following in 2019. This will hopefully provide an opportunity for more detailed engagement with the FCA's approach to, and conduct of, investigations and Enforcement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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