UK FCA and PRA Amend Enforcement Procedures

In February 2017, the UK Financial Conduct Authority (the “FCA”) and the Prudential Regulation Authority issued a joint policy statement (the “Statement”) regarding enforcement, following up on their April 2016 consultation paper.  The Statement announces changes to the Decision Procedure and Penalties Manual (the “DEPP”) and the Enforcement Guide (the “EG”).  While there are a number of changes, perhaps the most significant amendments to the DEPP and EG are:

    Focused Resolution.  The new procedures will allow a focused resolution agreement – a partial settlement – between the FCA and the subject such that (i) the facts would be agreed, but the breaches/liability would not; (ii) some issues would be agreed but others would not or (iii) the facts and breaches would be agreed but the penalties would not, and in each case the remaining issues would be tried in front of the Regulatory Decisions Committee (the “RDC”) (and/or the Upper Tribunal).  The procedure would allow a discount of up to 30% if settlement of at least some matters takes place in Stage 1 (see below).  The FCA would decide whether to issue a warning notice at this stage, but in general leans against it in light of the imminent final resolution.

Terminating Stage 2 and 3 Discounts.  Currently, there is a 30% discount if settlement is reached before the FCA issues a penalty (Stage 1), 20% between Stage 1 and the end of the period for making written representations to the RDC (Stage 2) and 10% between Stage 2 and a decision notice.   While the FCA will retain the 30% discount for contesting the penalty alone, it will abolish the Stage 2 and 3 discounts.

The two revisions above would be effective on March 1, 2017; others were effective as of January 31, 2017.