The Financial Conduct Authority (FCA) is transferring powers for some of its regulatory interventions down to senior managers within the organisation from the Regulatory Decisions Committee (RDC).
It says doing so, which is part of its pledge to become more assertive, will allow it to take faster and more effective decisions against bad firms and individuals, leaving the RDC to handle significant misconduct cases.
However, while the FCA’s aim to provide quicker decisions was welcomed, concerns are widespread that its move will reduce fairness in the interventions process.
The regulator consulted on the proposals in July and in its policy statement acknowledged the vast majority of respondents agreed with the aims but did not agree with how it would implement them.
“There was a concern that speed and efficiency were being emphasised unduly and would increase the potential risk of a lack of fairness and objectivity in decision-making,” the FCA said.
RDC independence
Most opposed saw the RDC as an essential element of procedural fairness as a check and balance on the FCA executive and supported its independence and objectivity.
The RDC is a committee of the FCA’s board that operates separately from the regulator with members drawn from business, consumer and financial services backgrounds.
The regulator said it had carefully considered whether to make any changes but rejected the concerns, noting that some decisions were already made this way and it provided a fair process.
“Our executive procedures comply with the statutory requirement that the decision is taken by a person not directly involved in establishing the evidence in most cases, and subject to those provisions, the decision maker and procedure are a matter for our discretion,” the FCA said.
“There is no additional legislative requirement that the decision is made by committee, or that our processes permit oral representations, or require separate legal advice.”
Decision making and groupthink
Concerns were further raised about consistency of decision making and that diversity of thought may be lost with the regulator becoming subject to groupthink.
In its response the FCA committed to regular training for decision makers, ensuring separation of evidence gathering and decision making, and to providing legal advice for decision makers.
It is also introducing a monitoring framework to ensure oversight of decisions, including quality assurance processes.
“We are building in a feedback loop and lessons learnt to ensure consistency of decision‑making,” the FCA said.
And a six-month post-implementation review will be conducted to assess the effectiveness of the reforms.
Emily Shepperd, executive director of authorisations at the FCA, said: “We are taking a fresh approach to tackling firms and individuals who do not meet the required standards.
“Our new streamlined decision-making process will allow us to be more assertive in stopping harm.”
Following the extension of powers, senior managers within the FCA will now be able to decide:
- a firm’s authorisation or an individual’s approval;
- action in straightforward cases to cancel a firm’s permissions and that action is contested;
- to start civil proceedings, such as seeking an injunction;
- to start criminal proceedings, such as a prosecution for insider dealing;
- to use the FCA’s powers to vary or limit a firm’s permissions;
- to use the FCA’s powers to impose requirements on a firm.