FCA Issues New Criteria for Enforcement Action, Investigations

The FCA has published a new process that helps define how it opts to utilize the appropriate regulatory tool in

The Financial Conduct Authority (FCA) is the UK’s paramount watchdog organization and regulator for the financial services industry – however, its enforcement mechanism is just one of the tools in its arsenal, boasting a wide range of measures.

Every day, the FCA helps police the financial services industry in the UK, taking a number of actions and measures against fraudulent entities or unregistered companies in the hopes of fostering transparency and fair practice. However, the FCA has just published a new process that helps define how precisely it opts to utilize the appropriate regulatory tool in a case-by-case situation.

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As a result of the large volume of inquiries and tips it receives, as well as the latitude of its jurisdiction, the FCA has underscored three questions to help it determine whether an investigation is warranted. These include the following:

  • Is an enforcement investigation likely to further the FCA’s aims and statutory objectives?
  • What is the strength of the evidence and is an enforcement investigation likely to be proportionate?
  • What purpose or goal would be served if the FCA were to take enforcement action in this case?

The genesis of the latest round of clarity from the FCA follows after a 2014 report from the HM Treasury that centered on enforcement decision-making process undergone by the regulator. Consequently, the FCA endorsed the publishing of its updated referral criteria in the hopes of spelling out a clearer background behind the likelihood and occurrences of its enforcement measures.

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Furthermore, the FCA is slated to publish a consultation paper later in 2015, which will help set out a comprehensive plan on how it plans to implement a cascade of other recommendations made in the review.

The FCA has also shined light on how it ultimately decides on which regulatory response is best suited to a specific case – this involves the assessment of a referral for a given enforcement investigation, weighing it against proper appropriate actions before any final decision is made by relevant senior staff. Finally, the FCA has reiterated that simply opening an investigation does not automatically entail a decision that a breach has been committed.

According to Georgina Philippou, Acting Director of Enforcement and Market Oversight at the FCA, in a recent statement on the criteria, “Enforcement is not the only tool at our disposal where we see misconduct by firms or individuals, nor is it the most appropriate one to use in every case.”

“Today’s publication will make our decision-making process more transparent. Firms and the public will now have a clearer understanding of the questions we ask ourselves before we start a formal investigation,” she added.

A little over a week ago, the FCA issued its latest string of warnings against two firms – both CMD Acquisitions and Financial Strategy Holdings t/a New Trade FX were sanctioned for providing financial services or products in the UK without the requisite authorization.

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