The FSA board commissioned the review in February after aspects of its process were criticised by the Financial Services and Markets Tribunal and because it was evident many affected by enforcement actions had doubts about the fairness of the process.
The review recommended there should be no change to the FSA’s risk-based approach in that it cannot attempt to pursue every rule breach and so selects cases according to their seriousness and how they fit in with its priorities.
It also recommended that the Regulatory Decisions Committee (RDC) is maintained but suggested the creation of a small, dedicated legal function to assist the RDC in its decision-making, meaning that the RDC will no longer have to look to the Enforcement Division for legal advice and support.
Callum McCarthy, chairman of the FSA, said: “This has been a full and careful review of the FSA’s enforcement processes and the board has accepted its recommendations entirely.
“We believe that they will bring greater clarity as to why certain cases are subject to enforcement action and that those affected will have a better understanding of the case to which they must respond.”
“It is worth re-emphasising that the FSA is not, and will not become, an enforcement-led regulator. We regard enforcement as a regulatory tool to be used selectively. But when it is used, it must be seen to be fair and combine fairness with reasonable speed and reasonable cost. These changes are designed to achieve this, “ McCarthy added.
Peter Vipond, director of financial regulation and taxation at the Association of British Insurers (ABI), said: “The ABI supports the creation of a separate legal function to assist the RDC as proposed by the review.
“The full disclosure of substantive communications between the enforcement team and the RDC to those facing allegations of breaching the rules is long overdue.”
