We covered in the last issue of Enforcement Watch some initial feedback on the FCA's consultation on its Mission - see Enforcement Watch 21 "FCA Consults on its Mission". We noted that the FCA's Mission is (amongst other matters) a statement intended to influence its strategic decision making and to allow it to determine how to consistently and appropriately prioritise the spending of its resources.
The FCA has now published its Mission (18 April 2017). It is a high level document embodying both current FCA practice and thinking as well as setting out its future objectives and aspirations. Much of the content of the Mission will be self-evident and uncontroversial to readers. We therefore summarise below only those areas likely to be of particular interest:
- The Mission describes a proposed four stage approach for taking all "regulatory decisions":
- First, the FCA will consider whether the issue falls within any of five types of particular harm. These include damage to market confidence and consumer detriment.
- Second, the FCA will use its so-called "diagnostic tools" to scope out the relevant issue. This includes s.166 skilled person reports, investigations and also supervision. It also includes work that is not specific to a firm or person, such as thematic reviews and market studies. The FCA notes that some tools involve significant cost to firms that may ultimately be passed to consumers and, as such, says that it will seek to deploy diagnostic tools in the most cost effective way. Also of note is that the FCA considers it necessary to describe an investigation as a "diagnostic tool" and makes clear that it does not imply or pre-judge wrongdoing. There is plainly a desire on the part of the FCA to make firms and individuals more comfortable and less defensive in response to investigations.
- Third, the FCA will consider it's so called "remedy tools". These range from the publication of guidance and "Dear CEO" letters through to sanctions. In selecting the appropriate tool, or combination of tools, the FCA will aim to apply an approach based on knowledge of the appropriate market to bring about a cost-effective solution with the biggest impact on the relevant issue.
- Fourth, the FCA will assess and discuss the impact of its interventions. This will include a candid discussion of unsuccessful interventions.
- In response to public perception that the FCA has failed to act on issues such as LIBOR, the Mission document reminds readers that the core jurisdiction of the FCA is in relation to authorised firms and approved individuals carrying out the activities set out in the Regulated Activities Order (RAO).
The FCA says that it tends to prioritise issues that arise in this core jurisdiction over issues that arise outside it. However, the Mission says that the FCA may still take action outside this core jurisdiction if the matter is "serious". The FCA also says that it will work with the industry to help devise standards and guidance that span activities beyond the RAO, and that this will also help the FCA explain what it expects of individuals under the new SMCR.
- The FCA has also recently reviewed its approach to enforcement to ensure better prioritisation, consistency and know-how sharing within the Enforcement Division. The resulting policy statement is covered in this issue
FCA and PRA Publish Joint Statement on Enforcement.
In Enforcement Watch 21, we noted the discussion around a statutory duty of care imposed on all authorised firms towards their retail clients "FCA Consults on its Mission". During the press conference launching the Mission, Andrew Bailey (Chief Executive) said that the issue was complex and would be the subject of a discussion paper, likely as part of a wider review of the FCA Handbook after the completion of the Brexit process. As noted, in the Consultation for the Mission, the FCA has already expressed a degree of skepticism about the need for such a duty.
Finally, it is of interest that during the same press conference Andrew Bailey also indicated that the FCA's intention remained to roll-out SMCR to all authorised firms in 2018, despite the absence to date of a consultation paper.