Published on 1 February 2017
Implementation of the Enforcement Review and the Green Report – PS2/17
In this policy statement (PS) the FCA and PRA respond to comments received on joint Consultation Paper (CP) 14/16 ‘Proposed Implementation of the Enforcement Review and the Green report’ and explain what changes are being made to enforcement policies and processes.
On 18 December 2014, HM Treasury published its ‘Review of enforcement decision-making at the financial services regulators’. The focus of the review was on the transparency, fairness, effectiveness and speed of the FCA’s and PRA’s enforcement decision-making process.
The review made a number of recommendations to the FCA and the PRA with the aim of improving current enforcement decision-making processes and arrangements. The recommendations ranged across the whole enforcement process, from referral to contested decision-making.
On 19 November 2015, the PRA and the FCA published two reports: a joint report into the failure of HBOS plc; and Andrew Green QC’s Report into the Financial Services Authority’s (FSA) enforcement actions following the failure of HBOS (the Green Report).
The Green Report made four recommendations, three of which were relevant to the review recommendations, and relate to: i) pre-referral decision-making; ii) ongoing dialogue between enforcement and supervision during an investigation; and iii) informing the subject of an investigation about the matters under investigation.
This PS will be of interest to all firms and individuals involved in providing financial services as it builds on our existing statements about our use of enforcement powers. It will be of particular interest to all firms and individuals (and their professional advisors) that are, or anticipate that they are likely to be, subject to FCA and/or PRA enforcement action.
Chapters 3 and 4 of this PS are on regulator cooperation and subject’s understanding and representations in the context of enforcement investigations. Chapters 2, 5 and 6 are FCA only.
Feedback on consultation responses
There were thirteen responses to CP14/16. A list of the non-confidential respondents is included in Annex 1. Six responses were from law firms, two from individuals, four from representative bodies, and one from the Financial Services Consumer Panel.
The responses were broadly supportive of the proposals, many of which were amendments to existing enforcement process and centred on increasing transparency. Not all respondents expressed a view on every question. Any additional comments tended to suggest where more information would be welcomed.
Policy Statement 2/17Published on 14 April 2016
Proposed Implementation of the Enforcement Review and the Green Report – CP14/16
Summary of proposals
This consultation paper (CP) sets out the PRA’s and FCA’s proposals for implementation of Chapters 3 (‘Co-operation between the regulators’) and 4 (‘Subjects’ understanding and representations’) of HM Treasury’s Review of enforcement decision-making at the financial services regulators (‘the HMT Review’). The focus of the HMT Review recommendations was on the transparency, fairness, effectiveness and speed of the FCA’s and the PRA’s enforcement decision-making processes.
The CP also incorporates the PRA’s and FCA’s proposals for implementing recommendations (2) and (3) of Andrew Green QC’s Report into the FSA’s enforcement actions following the failure of HBOS (‘the Green Report’). The Green Report made four recommendations, three of which are relevant to the HMT Review recommendations. They cover: (1) pre-referral decision-making; (2) ongoing dialogue between enforcement and supervision during an investigation; and (3) informing the subject of an investigation about the matters under investigation. Chapter 2 of the CP explains the PRA’s and FCA’s implementation at an operational level of recommendation (1). The final recommendation of the Green Report (recommendation (4)) in relation to internal meeting minutes has already been adopted and implemented by the PRA and the FCA at an operational level.
The PRA will be consulting separately on the settlement and contested decision-making recommendations (Chapters 5 and 6 of the HMT Review) later this year, once the Bank of England and Financial Services Bill has passed through Parliament. The reforms proposed by the new Bill will effect certain changes to the Bank’s corporate governance structure, including the change from the PRA being a subsidiary of the Bank of England to the creation of a new committee at the Bank of England, to be known as the Prudential Regulation Committee (PRC).
The PRA is also planning to publish its enforcement referral framework (Chapter 2 of the HMT Review) alongside its implementation of the other HMT Review recommendations.
This consultation on enforcement policy will be of interest to all firms and individuals involved in providing financial services and their professional advisers.
Responses and next steps
This consultation closed on Thursday 14 July 2016.