The Financial Services Authority (FSA) recently published a series of papers relating to the proposed changes to the regulatory requirements needed to create the new rulebooks and policies for the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Although the current FSA Handbook will be adopted by the FCA and the PRA, certain amendments need to be made to reflect the additional powers afforded to the new regulators by the Financial Services and Markets Act 2000 (FSMA). These new rulebooks will come into effect when the new regulators acquire their legal powers, which is currently scheduled to happen on 1 April 2013.
The papers, released in December 2012, comprise a consultation paper on decision-making procedures and penalties policies (CP 12/37), a consultation paper on the proposed statutory enforcement policies and procedures (CP 12/39), and further information on the transition towards the PRA.
The Financial Services Bill: implementing markets powers, decision-making procedures and penalties policies: CP 12/37
CP 12/37 is primarily consulting on the changes needed to certain parts of the FCA’s new Handbook and includes proposed amendments to the Listing Rules sourcebook, the Disclosure and Transparency Rules sourcebook, the Recognised Investment Exchanges and Recognised Clearing House sourcebook, and the Decision Procedure and Penalties Manual.
Of particular interest from an enforcement perspective are the proposed amendments to the Decision Procedure and Penalties Manual. The amendments include a draft statement of the procedure the FCA intends to follow when publishing information about the matter to which a warning notice relates. It also confirms that the FCA will have to consult with those persons to whom the warning notice is given before the notice is made public, with recipients to be given seven days to respond. The FCA will not publish any notice if it believes that to do so to would be unfair to the person in respect of whom action has been taken, or where it would be prejudicial to the interests of consumers or the stability of the UK financial system.
The deadline for responses to CP 12/37 is 1 February 2013.
The PRA’s approach to enforcement: consultation on proposed statutory statements of policy and procedure: CP 12/39
CP 12/39 is a joint consultation between the FSA and the Bank of England in which the PRA’s proposed statutory enforcement policies and procedures are considered. The proposed policies required by the amended FSMA include, amongst others, a statement of the PRA’s proposed policy on the imposition and amount of penalties under FSMA, a statement of the PRA’s proposed policy on the imposition and period of suspensions or restrictions under FSMA, and a statement of the PRA’s proposed policy on the publication of disciplinary and other enforcement actions.
These statements will replace existing FSA material, namely those currently included in the Decision Procedure and Penalties Manual, which will not be adopted by the PRA.
Responses to the consultation should be submitted by 28 February 2013.
Further information on the transition towards the PRA
The FSA issued further information regarding the transition towards the PRA on 17 December 2012. The letter, written by Andrew Bailey, the Managing Director of the Prudential Business Unit, provides detail on what firms need to do in order to be ready for the ‘legal cutover’ on 1 April 2013.
The introduction of the new regulators and the powers that come with them is driven by a need to bring increased transparency to the enforcement process. The proposals, however, have been subject to criticism, with some firms voicing concerns over the lack of guidance to clarify the regulators’ policy intentions.
A further update from the FSA is expected in early 2013.
A copy of consultation papers CP12/37 and CP12/39 can be viewed here and here, and the FSA’s information pack on the transition towards the PRA can be viewed here.