An issues paper published today outlines the legislation under which the FSA must operate, including the warning notice, decision notice and tribunal framework, and makes clear that the FSA is not contemplating any changes to primary legislation as a result of the Review. It does, however, note that within the constraints of the legislation there is considerable scope for flexibility in the process and the current model is not the only possible one.
David Strachan, FSA Director leading the review, said: "There has already been a lot of interest in the review and I hope today's paper will stimulate the debate further. The FSA and the industry now have over 3 years' experience of the current arrangements, so getting feedback on these issues is clearly an essential component of the review."
The paper sets out the objectives for the decision-making process, which were established through consultation before the FSA formally gained its powers in 2001. These are, broadly, that the process be fair and seen to be fair and be efficient and effective. The paper seeks views on whether these objectives remain valid.
The limits of who can take the decision to issue warning and decision notices is constrained by the requirement that those directly involved in establishing the evidence cannot take the associated decision. Moreover, the decision must be the FSA's. This means that it is not possible for the investigators to take the decision. Nor could the FSA delegate the decision to a wholly independent body or pass all disputed cases to the Tribunal to resolve. Within these limits, the paper seeks views on a range of questions relevant to how the decision-making process could be structured.
The paper also asks for views on the way the subjects of regulatory decisions may make representations and for views on the way cases can be resolved through settlement. Most Enforcement cases are resolved without referral to the Tribunal and settlement of a case is possible at any stage of the enforcement process.
The risk that costs to firms and individuals could increase is an important consideration. The scope of "regulatory decisions" that the FSA is required to make ranges from authorisation and approval decisions to decisions on change of control of authorised firms, as well as those on disciplinary action. The recent 150% increase in the number of regulated firms highlights the importance of the FSA having decision-making processes that work effectively for small firms (which now comprise over 97% of total regulated firms) and individuals, as well as for large firms.
Finally, the paper considers the accountability of decision-makers to the FSA Board and asks what additional information could be published about the operation of its decision-making process which would enable commentators to make a better informed assessment as to whether the process was operating fairly and effectively.
