Referral process - Financial Conduct Authority

How Enforcement and Market Oversight and Supervision work together in the enforcement referral process - Identifying the right regulatory response

This page describes the framework in which we apply the referral criteria when deciding whether to appoint enforcement investigators. The referral criteria are focused on cases where the FCA may take regulatory disciplinary action against regulated firms or individuals. This can include fines, suspensions and prohibitions.

Using our enforcement powers effectively and proportionately plays an important role when pursuing our statutory objectives, including our operational objectives of:

  • securing an appropriate degree of protection for consumers
  • protecting and enhancing the integrity of the UK financial system
  • promoting effective competition in the interests of consumers

When deciding whether to appoint enforcement investigators, we are mindful that we have other tools available to us and that enforcement action is relatively expensive and resource-intensive both for us and the subject of investigation.

Before deciding whether to refer a case to Enforcement for investigation, we carefully consider what is the most efficient and effective way of achieving our statutory objectives of protecting consumers, enhancing market integrity and promoting competition and whether enforcement action is the right course of action to take in all the circumstances.  We also consider what the purpose of any enforcement action would be; for example, to deter wrongdoers from repeating behaviours (specific deterrence) or to change behaviour in the industry (general deterrence).

Our referral criteria set out our approach for when we will choose to exercise our powers to investigate. They list a number of factors we consider when determining which cases to pursue. Assessing these various factors requires the informed input of staff from Supervision (including Specialist Supervision such as Financial Crime Supervision), Market Oversight and Enforcement. Not all referral decisions are made via the processes described in this document as sometimes, for operational reasons, we may need to make adjustments as appropriate.

Enforcement has dedicated referral teams whose members liaise with staff in each area of the FCA that refers cases to Enforcement for investigation. Through this liaison the referring areas provide updates on developments and specific issues in each area. The referring areas also bring issues to the Enforcement referral teams’ attention as and when they arise so that the Enforcement teams can assess with the relevant area the appropriate regulatory responses to any suspected misconduct. This includes identifying cases that could be referred to Enforcement for investigation and which should be escalated to the relevant senior staff.

A strategic approach to Enforcement is essential, so we hold meetings with the relevant senior staff in Enforcement and each referring area, who are at least Head of Department level, to decide which specific cases should be prioritised for referral and where other regulatory tools should be used.

If Enforcement, Supervision and Market Oversight senior staff consider referral to Enforcement is the appropriate regulatory response, Enforcement will work with Supervision and Market Oversight to test the basis for the referral. This includes:

  • gathering necessary information and documents
  • assessing and testing existing evidence
  • identifying the scope of the investigation
  • recording the reasons for referring the matter to Enforcement

Once the basis of the referral has been tested through the above steps, if the appointment of enforcement investigators remains appropriate, a formal enforcement referral decision will be taken by the relevant senior staff from Enforcement, Supervision and Market Oversight. 

In relation to significant matters, if Enforcement, Supervision and Market Oversight senior staff consider that referral to Enforcement is not the appropriate regulatory response, a record of the reasons for this decision will be maintained.