The Financial Conduct Authority publishes new referral criteria for enforcement investigations

The Financial Conduct Authority (FCA) has updated the criteria and outlined the process it uses when deciding whether to refer a firm or individual to its enforcement division for a formal investigation.

Where misconduct is proved, an enforcement investigation can lead to fines, bans and suspensions. But enforcement is only one of a range of tools available to the FCA. The process published today will clarify how the FCA decides which regulatory tool is the most likely to fulfil its objectives in each individual case.

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:

  1. Is an enforcement investigation likely to further the FCA’s aims and statutory objectives?
  2. What is the strength of the evidence and is an enforcement investigation likely to be proportionate?
  3. What purpose or goal would be served if the FCA were to take enforcement action in this case?

In December 2014, HM Treasury published a review of the enforcement decision making process at the FCA and Prudential Regulation Authority. As a result of that review, the FCA committed to publishing updated referral criteria and to set out more clearly the process by which decisions to refer cases to enforcement are taken.

The FCA will publish a consultation paper later this year setting out how we plan to implement other recommendations made in the review.

In addition to publishing the referral criteria for enforcement investigations, the FCA has also today set out more detail about how it decides on which regulatory response is best suited to a case. This involves assessing whether a referral for an enforcement investigation is appropriate before a final decision is made by relevant senior staff.

The FCA has also made clear that by opening an investigation, it does not mean it has decided that a breach has been committed.  Nor does it mean that it has decided what type of enforcement action to take, if any, should it turn out that there has been a breach.

Notes to editors

  1. FCA’s enforcement referral criteria
  2. How Enforcement and Market Oversight and Supervision work together in the enforcement referral process - Identifying the right regulatory response
  3. HM Treasury’s review of enforcement decision-making at the financial services regulators
  4. The criteria published today do not apply to Competition Act 1998 (CA98) cases. Guidance as to when the FCA will consider using its CA98 powers will be published shortly.
  5. On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA). On 1 April 2014, the FCA took over responsibility for consumer credit regulation.
  6. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  7. Find out more information about the FCA.