Decisions decision - FCA proposes changes to its decision making

The FCA is seeking to make "changes to [its] decision making process that will enable [it] to make faster and more effective decisions" by moving some decision-making powers from the RDC to senior members of the Authorisation, Supervision and Enforcement Divisions. The proposals were published in the summer in Consultation Paper (CP21/25) 'Issuing statutory notices – a new approach to decision makers'.  

There are two key areas of decision-making which the FCA proposes to move from the RDC to senior FCA staff:

1. Whether to commence civil or criminal proceedings: this decision would be taken by the Enforcement Executive Director through the FCA’s Executive Procedures where, for example, the FCA is seeking an injunction (i.e. civil proceedings) or commencing prosecutions for insider-dealing or breaches of the Money Laundering Regulations 2017 (i.e. criminal proceedings); and
2. Whether to issue statutory notices where the FCA is proposing to/has exercised a number of its statutory powers: including the FCA's ability to vary permissions, refuse authorisation for a firm or individual (where contested), or impose requirements on a firm (where contested). It is proposed that this would be determined by the Authorisations Division alone in future, rather than the current situation where the decision is made by the RDC after recommendation from the Authorisations Division.

The RDC would, however, remain empowered to take decisions in cases involving enforcement of the FCA’s Principles and Rules for Businesses, Handbook Rules and Code of Conduct where the FCA is seeking to impose a disciplinary sanction such as a financial penalty or prohibition.

The proposals seek to allow the RDC to focus wholly on contentious enforcement in situations where harm has already occurred and the FCA believes that the affected party needs to be penalised for its failures. Meanwhile, senior FCA staff would be able to more efficiently enact measures to prevent or stop harm to the market or consumers.  

In particular, the Consultation Paper highlighted that the potential mix of decision makers is "inefficient and time consuming" and can lead to "duplication and delay". The assessment of these changes will be monitored "by tracking the time taken from case allocation to decision and the types of decisions taken in different situations".

We query, however, whether speed is the most important measure of success if it comes at the expense of procedural safeguards for affected parties.  

Under these proposals, the opportunity for the affected party to make oral representations prior to a decision being made will go from being a common occurrence to only being available under "exceptional circumstances". And unlike with the RDC, there will also be no restriction on communication between the decision maker and the FCA staff involved in the case without relevant third parties being present or otherwise having the opportunity to respond. Similarly, the RDC has a level of independence, as it has its own separate, legal advisors to those advising the FCA staff involved in the case. Under these proposals, however, the decision maker may also be advised by the legal advisers who have advised the FCA staff. 

The FCA states in the Consultation Paper that the "changes we are making will not compromise the rights and protections that firms and individuals who are subject to these processes have; we will still remain transparent and accountable for all our decisions made through either process." 

It remains to be seen whether that will indeed be the case. It is anticipated that the revised Policy Statement implementing these proposals will be published in November 2021.

With thanks to Ellen Blakeney for her contribution.