FSA Enforcement
Ian Mason
Head of Department, Wholesale Group
Enforcement Division
June 2005
Enforcement in the FSA context
• FSA is not Enforcement led
• Small proportion (12%) of total budget
• Selective risk-based approach
Risk-based enforcement: selection of cases
for investigation
• Risk means risk to FSA’s four statutory
objectives
–
–
–
–
Market confidence
Public understanding
Protection of consumers
Financial crime
• Risk based approach operates at two main
levels
– Strategic planning and resourcing
– Individual case resourcing
FSA Enforcement Division
• About 250 staff
• Forensic investigators, lawyers and support
staff
• Wholesale and Retail Groups
• Reports directly to CEO
• Currently about 150 cases open
FSA Enforcement – key priorities
• Senior management responsibility
• Market abuse and insider dealing
• Breaches of the Listing Rules
• Conflicts of interest
• Mis-selling, complaints handling
• Financial promotions, financial resources
• Perimeter cases
Investigatory Powers
• FSMA part IX, sections 165–177
• Powers to require information
• Appointment and powers of investigators –
s167 and 168
• Skilled persons
• Search warrants
The Enforcement Toolkit
FSA ADMIN POWERS
CIVIL JUSTICE
CRIMINAL JUSTICE
•Discipline
•Injunctions
•Prosecute
•Vary firm’s permission
•Restitution
For What?
•Withdraw authorisation
or approval
•Insolvency Procs
Breach of Gen
Prohibition
•Prohibit individuals
Misleading statements
•Restitution
Misleading practices
•Sanctions for Market
Abuse
Insider Dealing
M L Regs
Enforcement: An Overview of the process
Urgent Action
FSA decide to use
enforcement tools
projects - planning, control
and organisation
urgent civil
action
investigations: gathering information and
documents
deciding to take
further action
handling specific issues
unauthorised
business
insolvency
proceedings and
orders against
debt avoidance
urgent
administrative
action
appointment
of a skilled
person
appointment
of third
parties
Regulatory Decisions
Committee
Financial Services and
Markets Tribunal
civil proceedings
international
enforcement
issues
collective
investment
schemes
criminal proceedings
publicity
RDC / Tribunal Process
• Warning Notice
• Written & Oral Representations
• Decision Notice
• Referral to Tribunal
• Final Notice
• Publicity
• Settlement / mediation available throughout
Sanctions
• Factors include
– Seriousness
– Deliberate or reckless behaviour
– Financial resources
– Conduct after contravention
– Disciplinary record and compliance history
2004 Outcomes
• 76 cases through RDC
• 38 references to Tribunal
• 4 Tribunal decisions
• 11 Tribunal cases struck out / withdrawn
• 101 Final Notices
• Over £21 million in fines
• Over 280 international requests
International Co-operation & Information
Sharing
• International co-operation between
regulators – crucial in the context of
regulating an increasingly global market
• Advance warning of problems through proactive sharing of intelligence
• Assistance with investigations involving
cross-border elements e.g. obtaining
documents and testimony
Number of requests
Number of international requests received by the FSA in 2004
50
45
40
35
30
25
20
15
10
5
43
Trend
31
29
28
23
22
25
24
18
18
22
16
-0
4
D
ec
N
ov
-0
4
4
ct
-0
O
-0
4
Se
p
4
A
ug
-0
4
Ju
l- 0
04
Ju
n-
4
M
ay
-0
4
A
pr
-0
ar
-0
4
M
04
Fe
b-
Ja
n0
4
-
US
9%
Others
27%
EU ONLY
64%
Requests for Assistance
Incoming Requests
• What do incoming overseas requests
relate to?
– Transaction data
– Good standing information
– Regulatory information from FSA’s files
– The exercise of statutory powers e.g. “sitting in”
– MLAT requests
Requests for Assistance
Breakdown by type of requests received during
June - December 2004
Others, 3%
Bank records, 1%
Goodstanding/
authorisation
enquiries, 23%
Interview (s), 3%
Transaction data,
48%
Regulatory
information, 17%
Proactive
disclosure, 6%
FSA’s power to co-operate – statutory
provisions
• Section 354: General duty to co-operate
– The FSA must take such steps as it considers appropriate to
co-operate with other persons … who have functions
• similar to those of the FSA; or
• in relation to the prevention and detection of crime
• Section 169: Assistance to overseas regulators
– Information gathering and document production (section 165)
– Appointing investigators (section 168(3))
– A direction permitting a representative of an overseas
regulator to attend and take part in interviews (section 169(7))
– Powers are backed by contempt sanctions (section 177)
Considerations in giving assistance
• Reciprocity of assistance
• Whether the assertion of jurisdiction has a close
parallel in the UK
• Seriousness of the case and its importance to
persons in the UK
• Whether in the public interest
• Contribution to cost
• Such considerations do not apply if we consider that
the exercise of investigative powers is necessary to
comply with a Community obligation
Disclosing Information to ORs
• Sections 348 and 349: a general prohibition on
disclosure of “confidential information” which
– relates to the business or other affairs of any person
– is received by the FSA in discharge of its functions
– is not available in the public domain
– is not summary information
• Treasury Regulations provide “gateways” enabling
disclosure
• Improper disclosure constitutes a criminal offence
Considerations in disclosing information
to non-EEA regulators
• Where “Directive information” is to be disclosed to
a non-EEA regulator there must be a “co-operation
agreement”
• Information must be subject to guarantees of
equivalent confidentiality protection
– Overseas regulator’s self-certification that equivalence can
be met
– FSA’s consideration of relevant factors including overseas
regulator’s self-certification, consideration of legislation in
relevant jurisdiction and our knowledge of the applicable
regime
• If it concerns personal data, considerations under
the Data Protection Act will also apply
Requests for assistance
What should requests contain?
• Description of underlying facts
• Connection with your jurisdiction & suspected breaches of
your legislation
• Responsibility for enforcing that legislation
• Information/assistance that you require
• Information useful in identifying relevant persons and
documents
• How that information/assistance will assist your enforcement
functions
• Intended use
• Time within which assistance required
• Preferred form in which information is required
• Related requests and other UK bodies contacted
• Special precautions (sensitivity/confidentiality)
• Contact information