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Companies under enforcement investigations by the UK’s financial regulators will be able to challenge proposed penalties without losing discounts for cooperation, as is currently the case.
The change was announced on Wednesday by the Financial Conduct Authority and the Bank of England’s Prudential Regulation Authority in a joint statement as part of a package of measures designed to bring more transparency to contentious regulatory matters.
Fines, and also facts, can now be contested by companies and individuals under investigation by the watchdogs in front of the FCA’s Regulatory Decisions Committee. This is an internal panel of experts that hears FCA cases and decisions before they are made public.
The watchdogs also pledged to give more information to subjects of investigations on why they have been referred to enforcement.
“It is essential that our enforcement decision-making processes command public confidence and operate both efficiently and fairly,” said Mark Steward, the FCA’s director of enforcement and market oversight.
The overhaul comes after a review of the regulators’ enforcement powers by the Treasury in 2014 and also a further excoriating report by Andrew Green QC into the now-defunct Financial Services Authority and its failure to investigate properly the £25bn collapse of HBoS, the high-street lender, in 2008. His report formed part of a much-delayed inquiry into HBoS’s collapse, which was finally published in 2015.
Only one former senior executive of HBoS, now part of Lloyds Banking Group after a government-backed takeover at the height of the financial crisis, was sanctioned by the FSA. Mr Green found in his report that it was “plainly in the public interest” to consider opening investigations into the HBoS’s former chief executive and chairman, Andy Hornby and Lord Stevenson. The FCA is now investigating a number of former HBoS senior executives.
The FSA split in 2013 to form the PRA and the FCA.
Miles Bake, the PRA’s head of legal in its regulatory action division, said: “The PRA’s enforcement processes must be clear, transparent and reasonable. This Policy Statement outlines a number of concrete steps the PRA is taking to ensure that we implement the recommendations from the HMT Enforcement Review and the Report of Andrew Green QC.”
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