Following a review by HM Treasury in December 2014 of the enforcement decision making process at the FCA and PRA, the FCA has now updated the enforcement referral criteria and outlined the process it uses when deciding whether to refer a firm or individual to its enforcement division for a formal investigation.
Georgina Philippou, acting director of enforcement and market oversight at the FCA, said:
“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.”
When deciding whether to investigate, the FCA considers the following three overarching questions:
- 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?; and
- what purpose or goal would be served if the FCA were to take enforcement action in this case?
The FCA intends to publish a consultation paper later in 2015 which will set out how it plans to implement other recommendations made by HM Treasury’s review.