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May 7, 2014 12:07 am
The UK financial watchdogs’ enforcement processes are set to come under scrutiny as the Treasury conducts a review into the area.
George Osborne, the chancellor, said he wanted to examine whether the Financial Conduct Authority and the Prudential Regulation Authority were striking the “appropriate balance of fairness, transparency, speed and efficiency”.
The move will throw the spotlight once again on the FCA, which polices the financial markets and is under fire for the way it has been conducting its dealings with the City.
The Chancellor last month openly accused the watchdog of an “egregious” error in the way it briefed the media on its annual business plan – although that episode did not involve any enforcement actions.
The FCA has been taking a far tougher line with City wrongdoers than its predecessor, the Financial Services Authority, with the total value of fines increasing from £35m in 2009 to £472m in 2013. There is also a stronger focus on taking action against individuals.
Lawyers said the long period of time investigations could take and the increased number of incidents being referred to the FCA’s enforcement division were among the areas likely to come under scrutiny.
Nathan Willmott, a partner at the law firm Berwin Leighton Paisner, said: “The main concern from all sides is the time it takes from launching an investigation to making a decision on whether there is a case to be answered, and then going through the FCA’s internal decision-making process.”
He added that there was also a concern that there were “far too many cases” being referred from the FCA’s supervisory division to enforcement.
The call for evidence from the Treasury, published on Tuesday, said the review wanted to hear from respondents on whether the criteria for referral to enforcement were “clear and being used appropriately”. The review will also look at whether there were sufficient opportunities for firms and individuals to make representations during investigations.
The Treasury will examine whether the settlement process delivers “fairness” to firms and individuals and whether there is excessive duplication between the work of the FCA’s internal Regulatory Decisions Committee and the independent Upper Tribunal – an appellate body.
The Treasury also called for views on whether the PRA, which is part of the Bank of England, should do more to publicise its own enforcement processes. The review will report to the Chancellor in the autumn.
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