217/98
22 December 1998
FAIR AND JUST ENFORCEMENT PROCEDURES ANNOUNCED FOR THE FINANCIAL REGULATOR
Measures to ensure the enforcement procedures of the new financial regulator are fair and transparent, and that it is not seen to be 'prosecutor, judge and jury', were announced today by the Chief Secretary, Stephen Byers.
The measures are being introduced in the light of the consultation on the Financial Services and Markets Bill, which will establish the Financial Services Authority (the FSA) as the new single regulator. Today's announcement clarifies the role of the FSA and the new tribunal. The FSA is responsible for conducting fair internal procedures before reaching a decision on a case that can, if the individual concerned wishes, be referred to the independent tribunal.
In addition, Mr Byers disclosed that the Lord Chancellor's Department is to publish draft rules of procedure for the tribunal in the new year.
Mr Byers announced 4 changes to the Bill to clarify and support the basis on which the process would work:
- a statutory duty on the FSA to establish publish and procedures and to act in accordance with such procedures;
- an explicit right to request to see the evidence on which a case rests and a duty on the FSA to disclose such evidence;
- an explicit bar on the FSA publicising enforcement action until the full process, including any tribunal procedures, has been completed; and
- dropping the power to make rules on when relevant evidence might be inadvisable before the tribunal.
Mr Byers said:
"The consultation has been truly open and we are taking on board comments received. There is support for the basic model of effective, open and fair administrative procedures, backed up by the opportunity to refer cases to a fully independent tribunal.
"These measures will further clarify the role of the tribunal and reinforce the transparency of the FSA procedures, which must be simple and fair.
"Concern has been expressed that the FSA could act as 'prosecutor, judge and jury'. This would clearly be unacceptable. I hope that the changes I've announced today will meet with broad approval and demonstrate that we are responding positively to the consultation process."
NOTES TO EDITORS
1. Under the Bill, the FSA will have a range of enforcement powers, ranging from public statements about misconduct and fines to withdrawal of permissions or authorisation. The Bill sets out the basic framework for these decisions to be taken by the FSA, which requires the FSA to issue warning notices, disclose the reasons for their intended action etc.
2. As with any body exercising statutory functions, the FSA must exercise those functions in accordance with general principles of fairness and reasonableness. Last week the FSA issued a consultative paper, Financial Services regulation: Enforcing the new regime, which sets out how they propose to operate their internal enforcement procedures in order to meet these obligations.
3. The Bill also establishes an independent, external tribunal, run as part of the Court service, which provides the opportunity for challenging and reviewing the FSA's decisions. The tribunal is to be able to consider cases de novo (ie looking afresh at the merits of the case). It will also be able to substitute its own conclusions for those of the FSA. In line with normal practice for Court Service tribunals the detailed procedural rules for the new tribunal will be set through rules made by the Lord Chancellor.
4. Consideration is being given to comments on other areas of the Bill and further announcements will be made in due course.