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Executive power: the FCA implements decision-making reform

The FCA recently published a policy statement outlining changes to its decision-making processes, in order to make “faster and more effective decisions” (PS21/16: Issuing statutory notices – a new approach to decision makers). The publication follows a consultation process undertaken from July to September 2021.

The changes, which came into force on 26 November, primarily relate to the transfer of certain decision-making functions from the FCA’s Regulatory Decisions Committee (RDC) to the FCA’s senior managers.

The RDC exercises certain regulatory powers on behalf of the FCA and whilst it is accountable to the FCA Board, it is separate to the FCA’s executive management structure. Following the changes, the RDC will retain decision-making power for enforcement cases in which the FCA proposes disciplinary sanctions or seeks a prohibition order.

However, the FCA executive has now assumed the power to make the following decisions.

  • To use the FCA’s own-initiative intervention powers to impose a requirement on a firm, or to vary a firm’s permissions.
  • To make a final decision about a firm’s application for authorisation or an individual’s authorisation for approval that is contested.
  • In “straightforward” cancellation cases, to remove a firm’s permissions where a firm does not meet the FCA’s regulatory requirements.
  • To begin civil and/or criminal proceedings.

The FCA’s position is that these decision-making changes are necessary to allow the FCA to move quickly and to be more efficient and effective in stopping harm to consumers and markets. In relation to civil and criminal proceedings these changes are required to enable the FCA to pursue time-sensitive relief, such as injunctions.

Specifically regarding criminal proceedings, the FCA’s position is that intervention decisions are time critical and protective measures where harm has not yet crystallised and a quick response is required to halt any possible continuing harm. In accordance with the policy, FCA staff will only exercise this function in cases where the relevant facts and considerations are not complex. Decisions on more complex cases, and in which investigators are appointed, will remain with the RDC. We will watch with interest to see how in practice the FCA distinguishes between straightforward and more complex cases.

Responses to the consultation raised concerns that by-passing the RDC emphasised speed and efficiency over procedural fairness and objectivity. The independence of the RDC from FCA enforcement teams is considered to be an essential check and balance on the FCA executive and ensures separation between the investigation process and key decision-making. It will be particularly interesting to see whether these procedural changes will result in the commencement of an increased number of civil and criminal proceedings and the success rate of those proceedings.

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.”

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litigation, fca, regulation, financial services, financial regulation

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