ABI Urges Reform of FSA Enforcement Procedures

April 22, 2005

The Association of British Insurers (ABI) has urged the U.K.’s Financial Services Authority (FSA) to improve its enforcement procedures so that they provide “greater transparency, objectivity and certainty.” The ABI’s recommendations are made in its response to the Enforcement Process Review Issues Paper that the FSA published in March.

In its submission, the ABI noted the enforcement agency’s “willingness to consult on its enforcement process,” indicating that this approach is “an important constructive opportunity to improve the FSA’s procedures.”

In particular, the ABI is now proposing that the current system of enforcement be improved in three key ways, as follows:
— In line with principles in the Government’s recent Hampton Review on regulation, the FSA should make more effective use of its normal supervision of firms before embarking on specific enforcement action. The relevant supervision team should be involved in FSA discussions throughout this process;
— the FSA should improve the quality of its investigatory work. The regulator should ensure that its enforcement staff have the best possible knowledge of the industry and its issues;
— the FSA must be fair, and seen to be fair. It must demonstrate more openly that the work of the Regulatory Decisions Committee (RDC) is “independent, fair and robust”. In particular, the ABI argues that firms being investigated are entitled to know precisely what evidence has been presented about them to the RDC by FSA officials and given adequate opportunities to respond.

In its submission the ABI’ stressed that “there is a perception that FSA enforcement staff are often intent on delivering a particular message to the market and seek to build a case against a firm or individual to support that message.”

Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, commented: “FSA enforcement procedures need to command greater confidence within the regulated community. So the FSA will need to address specific industry concerns about its tendency to build a general case on the basis of a very small number of cases and its willingness to apply some standards retrospectively.”

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