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Global Trustee and Fiduciary Services News and Views
| Issue 47 | 2017
57
department to reach an initial decision.
If the matter proceeds further, investigators
are appointed and scoping discussions held
with the firm or individual.
At the end of the investigation stage, a
report is sent to the person under
investigation. If Enforcement wishes to
proceed, the matter is sent to the RDC.
The RDC members are not members of the
FCA’s staff, and they and their secretariat
are kept as separate as possible from the
rest of the FCA. In particular, the RDC has
its own lawyers, thus avoiding the need for
the RDC to take legal advice from lawyers
working in Enforcement.
This description of the process therefore
does provide some comfort that proper
attention is given to the existence and
management of conflicts of interest that
might influence the fairness of enforcement
decision-making.
Does the existing process work effectively?
It is difficult to decide conclusively whether
the existing process works effectively
without knowing more both about the
cases that are referred internally and about
those that are later discontinued, either
through Enforcement’s decision or the
RDC’s. Nevertheless, the regular procession
of published Decision and Final Notices
gives a reasonable idea of the outcomes
of the process.
Most of the FCA’s Final Notices set out in
detailed terms a firm’s, or increasingly
an individual’s, failings. However, it is the
RDC that produces the Notice. The firm
or individual being punished is given an
opportunity to comment and to ask for
changes to the text, but the document
will inevitably show the RDC’s side of the
case more forcefully.
The Upper Tribunal
Another way of considering the effectiveness
of Enforcement and the RDC is to consider
the cases that are subsequently sent to the
Upper Tribunal. Where a person disagrees
with the FCA’s findings, the case can be
referred to the Tribunal, which hears the
case again. So it is not correct to refer to
the Tribunal as hearing appeals.
The RDC has had its decisions overturned
in relatively few cases since the regulatory
regime began in 2001. The first such case
was in 2005 against Legal and General
Assurance,
7
in which the regulator intended
to levy a financial penalty of GBP1.1 million
for alleged rules breaches in the selling of
low-cost with-profits endowment mortgage
policies. The case was about the firm’s sales
and compliance procedures and whether they
caused systemic misselling.
The current remit
of regulators
covers supervision,
penalty and redress,
which can distort
incentives and create
the potential for
regulatory moral
hazard and political
influence, according
to the BBA.
The Tribunal said that there were procedural
defects that would have caused or contributed
to missales. However, the Tribunal did not
accept the FSA’s claims about the extent of
the missales. The Tribunal said that the RDC
was “in error in its approach to the misselling
cases and reached conclusions not justified by
the material before it”. A financial penalty of
GBP575,000 was later issued.
Two other important cases that are worth
considering are those relating to Angela
Burns and John Pottage.