FSA Enforcement Review: a dose of TCP for the Regulator?

On 19 July 2005, the Financial Services Authority published the findings of its Enforcement Process Review. Whilst the review has steered away from a wholesale reshaping of the existing enforcement process there are some important changes proposed to the way that it is implemented, write Ailbhe Edgar and Neil Mirchandani of Lovells’ Contentious Regulatory Practice. At the core of the proposed changes is the perceived need to ensure greater fairness in the process. Whether the proposals will challenge perceptions that in enforcement the odds are stacked against the firm, only time will tell. This will depend, they argue, on the extent to which the FSA adopts the review’s recommendations on publication of critical information regarding case experience.

The review was commissioned in the wake of criticism of the FSA’s enforcement process by the Financial Services and Markets Tribunal in Legal & General Assurance Society (L&G) v FSA. Following the decision in L&G v FSA , John Tiner, Chief Executive of the FSA, announced that “After three years of operating the existing arrangements for investigations and making enforcement decisions, and in the light of the Financial Services and Markets Tribunal’s recent judgment in the Legal & General case, a review of their effectiveness is timely.” The Tribunal found in that case that the FSA was in error in its approach to part of the claim made against L&G and reached conclusions which were not justified by the material before it.